Why You Need an Employee Referral Program

Six smart reasons to add one now

By Daniel Abramson, HRSource

If a friend suggested a product or restaurant to you, you’d likely trust their recommendation, right?

The same principle applies to employee referral programs. Good people tend to associate with other good people, and hard-working employees don’t typically hang out with slackers. Rather, they gravitate toward like-minded friends and colleagues, and employees with a strong work ethic typically associate with others who share that personality trait. 

This means that when one of your A-players makes a referral, the candidate will likely be a solid citizen with good skills, thereby reducing the risk of hiring stranger.

Here are six specific reasons why you should implement an employee referral program now: 

Highest Success Rate: According to CareerBuilder, fully 82% of employers consider employee referrals their top source for return on investment (ROI). Engaging employees in the recruiting process is crucial.

Faster Hiring: According to HR Technologist, referred candidates are hired 55% faster compared to those sourced through career sites.

Improved Quality of Hire: Some 88% of employers regard referrals as the best source for above-average candidates, according to Dr. John Sullivan Research. Referred candidates also fit the company culture better, respondents reported.

Reduced Turnover: Referred employees show a 45% retention rate after two years, compared to 20% from job boards, according to the Society of Human Resource Management (SHRM).

Cost Efficiency: Hiring through referrals is 51% less expensive and up to 10 days faster than other methods, SHRM found.

Boost Workplace Engagement: Referral programs foster a family atmosphere, boosting employee investment and self-worth. Encouraging employees to tap into their networks instills pride and belonging that monetary rewards can’t match.

Recommended Rewards

A referral bonus fosters a mentoring environment, aiding in the onboarding of new employees. We suggest a total referral payout of $500, with half provided after 60 days and the remaining $250 afforded after the new hire has been on board for 180 days.

Encourage multiple referrals within a year by offering a weekend trip for two to a local destination or an AVB event. (Note: BrandSource’s 2024 Convention in Dallas is coming up in August!) 

What’s Next?

Ensure company-wide promotion of your referral program. Afterall, employees need to know it exists to utilize it effectively.

Spread the word through:

  • Physical flyers posted in breakrooms near the time clock, and include QR codes for easy access
  • Company newsletters featuring success stories of high-performing employee referrals
  • Weekly staff meetings and informal gatherings.

And please note: Keep in mind that you have the final say on who gets hired. Just because a person was referred by another employee does not mean that they should automatically be offered a job. (Unless of course you like them!) 

Need more help or want to bounce some ideas around? Contact me at the phone number or email address below.

Daniel Abramson is managing lead of HRSource, a comprehensive collection of customized employment tools and turnkey HR solutions exclusive to BrandSource members. Contact Daniel at (540) 535-8484 or dabramson84@gmail.com.

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