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Why you should implement an Employee Referral Program

By George Waggott, founder, and Roberto-Fonseca Velazquez, summer law student, George Waggott Law

The gist of an employee referral program is to incentivize the organization’s current employees to recommend candidates for an open position or as a good fit for the company overall. Current employees should know the organization from the inside out and therefore should have a good handle on what an ideal employee profile looks like. The key takeaway for employers is that an employee referral program usually saves both time and money by shortening the hiring process and leading to better retention rates. Statistics have proven that employees who have successfully referred a candidate for an open position, stay longer with the company than employees that haven’t. So, what are you waiting for?!

Employers should ensure that they design their employee referral program with a clear goal in mind. This includes determining whether you want a stream of referrals throughout the year or only when there is a specific open position. The employer will also want to create a system for receiving referrals and tracking them through to a hire or no hire decision. This system should also be transparent to employees, in part to help ensure more participation in the program.

For a successful employee referral program, employees also need to be aware that the program exists! The employer should include the details of the program and incentives in the employee handbook or a specific company policy, and also have this information readily available. It is also helpful to make mention of the employee referral program at quarterly or even monthly meetings (especially during a hiring blitz). If employees don’t know about the program, it is unlikely they are going to go out of their way to flag a potential candidate to the hiring team. Some organizations organize referral parties or blitzes to encourage participation and referrals.

Employers should also be mindful to implement a program with incentives that make it worthwhile for employees to participate. Incentives can include monetary bonuses, extra vacation days, an expense paid trip or physical prizes (think tech gadgets or gift certificates). Typically, the relevant incentives should be given after a hired candidate has passed probation. According to one study by TalentLyft, almost 70% of companies reward employees for referring a qualified candidate with a cash prize between $1,000 and $5,000. Ultimately, each employer should decide what kind of reward works within their recruitment or HR budget. Sometimes being creative can be quite important.

Again, these programs really do work! All the market research on employee referral programs shows that both the referred employee and referrer employee will stay with your organization longer. The employer time to hire and cost per hire will also usually decrease by creating a pool of referred candidates. Lastly, the employer can gauge employee engagement and job satisfaction. Let’s get referring!! 

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