Employers often receive a high volume of applications for open positions, and employee referral programs can be one tool to help identify qualified candidates efficiently. Here are some guidelines to help you develop and manage an effective referral program.
KEY POINTS
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What is an employee referral program?
An employee referral program is a recruiting strategy that encourages employees to recommend qualified candidates from their networks, typically by offering incentives (such as bonuses or recognition) when a referral results in a hire.
Why should employers consider referral programs?
A well-run employee referral program can help improve hiring outcomes by identifying high-quality candidates, who employees, knowing the company or the role, may think are a good fit for open position.
What steps can help build a better referral program?
#1: Put it in writing.
As a best practice, put your program in writing and include a policy on your program in your employee handbook.
#2: Use clear criteria.
Employers may generally set their own rules for who is eligible to participate in a program, so long as they don't violate nondiscrimination laws. For instance, some employers allow full and part-time employees to participate, but prohibit individuals who are no longer with the employer at the time of payout from receiving the incentive.
When developing your referral program:
- Be clear that all referred candidates will be:
- Considered and evaluated based on experience and qualifications; and
- Subject to the same pre-employment standards as all other candidates.
- Provide details and examples of who is and who isn't considered a qualifying referral. For example, some employers exclude a candidate who has previously applied, temporary workers, and/or former employees.
- Clarify the payment terms. Some employers split the incentive, providing part at the time of hire and the rest after a referred employee meets a certain length of service.
- Include a statement that the company reserves the right to change the terms of the referral program at any time, provided the changes comply with applicable laws.
#3: Consider incentives and recognition.
Cash bonuses are a popular incentive for employee referral programs, but employers have other options, such as paid time off, event tickets, prizes or special experiences. Some employees may also be motivated by other factors, such as recognition and a desire to help the company succeed, so design your program accordingly. For instance, you can post a leaderboard of the top referrers as a form of recognition.
#4: Prevent conflicts of interest.
Consider ways to prevent conflicts of interest from entering your hiring process. For instance, prohibit incentives for referrers who are within the open position's chain of command or are involved in the hiring process.
#5: Make it easy.
If your referral process is time-consuming, it may discourage employees from participating. Make sure you provide a quick, easy and consistent way for employees to provide the required information (online forms are a great option to simplify this process). A standardized process can also help you track and validate all referrals.
#6: Help employees be good ambassadors.
Train your employees on your employer brand and encourage them to share why they think your company is a great place to work. Give employees examples of the skills and competencies you are seeking for the open position so that they can assess whether someone they know might be a good fit for the job.
#7: Promote the program.
Consider multiple ways to promote your program internally. Some employers choose to create a campaign for their employee referral program, including a slogan, posters in the workplace, internal company email messaging, and announcements at staff meetings.
#8: Evaluate effectiveness.
Track the percentage of referred candidates who are hired, the turnover rate of referred employees and other important metrics, and compare them against other recruiting methods. Make adjustments as necessary.
#9: Use a variety of recruiting methods.
Relying solely on employee referrals can limit the scope of your applicant pool. To help you reach a broad pool of applicants, consider a wide variety of recruiting methods and evaluate each candidate based on a consistent set of job-related criteria.
Conclusion
Employee referral programs can be a cost-effective way for employers to find great candidates. Consider the above guidelines as you develop or expand your own program.
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