Why You Need an Employee Referral Program in 2022

Save time and money by considering an employee-recommended candidate

By Daniel Abramson, HRSource

Think about it: If a friend recommends a product or new restaurant to you, you’d probably be inclined to try it, right?

The same goes with hiring through an employee referral program. We all know that good people hang out with good people. Plus, following a trusted employee’s recommendation will help weed out marginal performers and reduce the risk from bringing in strangers.

Also, people tend to gravitate toward like-minded friends and colleagues. Hardworking employees don’t typically hang out with slackers. Work ethic is a personality trait and employees with a strong work ethic typically associate with others who also have a strong work ethic.  This means that when one of your employees makes a referral, it’s likely that the person will be a solid candidate with good skills.

Let’s dig into the five reasons to implement a referral program next year:

  1. Employee referrals improve the quality of hires. Fully 88 percent of corporate employers say that referrals are the No. 1 best source for above-average candidates according to research by Dr. John Sullivan, an internationally known HR thought leader. Referred candidates are also a better culture fit than those hired through other sources. Ducks hang out with ducks, eagles flock with other eagles, and chemistry, fit and culture are critical in today’s workforce.
  2.  Employee referrals reduce the “time to hire.” Referred candidates are 55 percent faster to hire compared with employees sourced through job boards, according to HR Technologist.
  3. Employee referrals have the highest ROI. Eighty-two percent of employers rated employee referrals above all other sources for generating the best return on investment (ROI), according to CareerBuilder. It gets your employees engaged in the recruiting process. Also, the onboarding process is jump started because there’s built-in mentoring and handholding during the first 30 to 45 days.
  4. Employee referrals will help reduce your turnover rate. The retention rate for referred employees is 45 percent after two years, compared to 20 percent from job boards, according to Firstbird, a digital employee referral program. This is huge!
  5. Cost and time savings. Fifty-one percent of employers say was less expensive to hire through referrals and up to 10 days faster. On average, companies spend 40 percent less by hiring referrals than when recruiting candidates on job boards.

OK, so what should you offer as a referral bonus? I recommend $500: $250 if the new hire is still on board after 60 days, and the balance after 180 days have passed. Or refer two to three hires within one year and win a weekend trip for two to a regional destination or AVB Summit or Convention.

So what’s the next step?  Look, we know you’re busy managing your store. That’s why HRSource has developed “plug-and-play” Referral Bonus templates that are ready to go. All you need to do is insert your store name and determine the amount that you want to offer your employees. (See templates below). For more details on a referral bonus program, the HR Playbook distributed with the November print edition of YourSource includes program rules and regulations, and how-to’s on implementing a referral bonus program at the store level.

Still have questions or need some additional help?  Call, text or email me using the contact info below.

Now let’s get hiring!

Referral Bonus Template #1

Referral Bonus Template #2

Daniel Abramson is Managing Lead of HRSource, a comprehensive collection of customized employment tools and turnkey solutions exclusive to BrandSource members. For more information, contact Daniel at (540) 535-8484 or daniel@staffdynamics.biz.