Five good reasons to start a referral program at your store

By Daniel Abramson, HRSource

Finding good people who will show up for work continues to be one of the most difficult recruiting challenges in this “candidate short” job market.

But keep in mind, you have an entire team of employees in your store and warehouse that you can tap into as a referral network. All it takes is a little encouragement and incentive to get the employee referrals rolling, which is where the referral bonus comes into play.

An employee referral bonus is an incentive provided by you that motivates employees to help recruit candidates for your company. It’s a safe bet, because we all know that good people hang out with other good people. Or, as the animal analogy goes, ducks hang out with ducks, eagles hang out with other eagles.   

Here’s are five reasons you should consider a referral bonus: 

  1. Higher-quality Candidates

Your existing employees know your company culture and management nuances best. They know your staffing challenges and understand what kind of people you’re really looking for. Also, your employees probably have networks of people with similar skills and career orientations.

For that reason, referred candidates are usually the highest-quality candidates you can hire. According to the Society of Human Resource Management (SHRM), 82% of employee referrals generally yield the best ROI.

2. Shorter Time-to-Hire

Many organizations today struggle to fill their positions in a timely manner. Not having a person in a crucial spot can significantly hurt your store performance and stress your current staff with additional workloads.

Luckily, employee referral programs can significantly reduce the time needed for your store to fill open positions. Specifically, SHRM shows that the average time to fill an open position without an employee referral is 60 days. In contrast, it usually takes 25-30 days to fill a position via employee referrals. Vacancies equate to lost productivity, resulting in a marginal customer experience.

3. Lower Cost-to-Hire

Reduced time-to-hire usually means lower cost-to-hire as well. When the time-to-fill an open position is decreased, dealers spend less time and fewer advertising dollars on a single job opening money (and experience less aggravation).

Often, dealers with successful employee referral programs don’t even need to invest in other channels such as job boards, LinkedIn, employment agencies or social media recruitment.

4. Higher Retention

Having an employee referral program can significantly improve your people retention efforts. Given the ongoing “Great Resignation,” it’s more important than ever for owners and GMs to invest in employee retention. In fact, Americans have been quitting their jobs by the tens of millions since 2021 with no job in the wings!

There’s a lot of research that shows how employee retention rates differ, depending on the source of the new hires. For example, 45% of employees sourced from employee referrals stay on for longer than four years on average, while only 25% of employees sourced through job boards remain for more than two years.

5. Enhanced Company Culture

When onboarding new people, owners want to make sure the candidates fit the company culture and the store’s core values. When there is a good fit between the employees’ beliefs and the organization’s mission, company culture becomes healthier and the employee and customer experience improve significantly. And when the customer has a good experience, they tell their neighbors and friends about your store. It’s all related.

Here’s are some next steps toward implementing an employee referral bonus program at your business:

I recommend you offer a $500 bonus — $250 after the new hire’s first 90 days and the other half in another three months. This minimizes your risk should the new person’s tenure prove short. Note: some stores pay employees $750 to $1,000 for successful referrals using the same two-payment approach. I have found that anything less than $500 will not grab the attention of your staff.

Also, BrandSource has designed some ready-to-go graphic templates with the rules and fine print of the standard referral program suggested above.  All you need to do is to fill in your name and company logo and you’re ready to go.

To access the templates, or for questions about referral bonus programs or any HR issues, please contact me at (540) 535-8484 or Or better yet, stop by the HRSource booth and say hello at this month’s Summit in Las Vegas.

Daniel Abramson is managing lead of HRSource, a comprehensive collection of customized employment tools and turnkey solutions exclusive to BrandSource members.

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