8 Ideas for an Effective Employee Referral Program

When you’re looking to fill open positions in your company, you likely have a wide variety of sources you pull from externally — job boards, your recruiting team, and social media, just to name a few. But you might be overlooking an incredible source of talented, vetted, highly qualified candidates: your current employees.

Building a great employee referral program can help you gain access to the people your employees already know, who might be just the people you need to grow your company and help you thrive. But putting one together from scratch can be a bit complicated. This guide will take you through everything you need to know about employee referral programs.  

What is an Employee Referral Program?

The concept of an employee referral program is simple: you incentivize employees to recommend people in their networks for your open positions. The referring employee might be thanked with monetary awards, gift cards, or something else (we’ll cover more ideas shortly).

The Benefits of Employee Referral Programs

Your recruiting strategy (and corporate rewards strategy) should definitely include an employee referral program because they’re highly effective at filling open roles, and they can even help raise employee engagement.

They give you access to a pool of talented people who already know someone at your organization. Using this access wisely can help your talent acquisition team streamline hiring and access top talent. In fact, Harvard Business Review found that referrals generated 70% more hires than non-referrals.

Employees are careful about who they refer because they are concerned about their reputation at your company. And their referrals will work hard because of that personal connection as well — they don’t want to let down the person who brought them in.

Plus, referral programs are great for your current employees too. They make them feel included in the hiring process, which makes them feel valued. Plus, the rewards they receive don’t hurt either. And the chance to bring in a trusted former colleague so they can work together again makes everyone feel great.

8 Ideas for Creating a Successful Employee Referral Program

Of course, you only reap the benefits of your referral program if it’s implemented thoughtfully and strategically. These eight employee referral program ideas will help you do just that for your own program.

1. Ensure Your Employee Brand is On Point

This is first on the list because it’s absolutely critical — even the biggest cash bonus isn’t going to encourage your employees to refer the best people they know if they don’t like working there. If your company culture is toxic, or their department is chaotically managed, or your compensation and benefits are below the market, you’ll struggle to attract great candidates from referrals and anywhere else.

In fact, if things are really toxic, your employees are likely conducting the opposite of a referral program by themselves and warning people away from your company. Fix your culture and fix your employer brand first before you add a referral program, or you’ll continue struggling with retention and employee engagement along with hiring.

Watch Cooleaf's On-Demand Podcast: Crafting An Authentic Employer Brand

2. Consider Referral Sources Carefully

Referrals are an amazing source of high-quality candidates — with a catch. In the HBR stat above, the difference between referred and non-referred candidates is big. But the quality of those referrals also depends on how closely the employee and their referral worked together.

If your employee is recommending someone they worked with closely for years, that’s a powerful indicator they will be a good fit. However, if they simply follow each other on LinkedIn, that referral is no better than someone applying externally.

It doesn’t mean they’ll be a bad hire, of course — they could be amazing — just that the person referring them doesn’t know that for sure. Be sure to ask in your referral process how well the employee knows the person they’re referring so you can judge how strongly the recommendation should be considered.

3. Require a Specific Length of Tenure

It’s a good practice to ensure that the referred employee sticks around for a specified amount of time before their referrer gets their payouts. This ensures they’re making quality recommendations and that your organization is getting successful hires out of the process. Typically, having a tenure requirement of six months to a year works well.

4. Ensure You’re Not Building In Bias

One of the biggest challenges of employee referral programs is that team members will tend to refer people who are similar to them — this is called affinity bias. If your organization is working to become more diverse and inclusive, a poorly executed employee referral program can actually work against those efforts. Be sure to:

• Keep the program open to everyone in your organization, not limited to specific roles or departments.
• Evaluate all candidates received through referrals with the same standardized criteria so bias doesn’t creep in.
• Continually analyze how the program is performing, for the quality of hires and also in how your DEI efforts are or are not improved by the program so you can make adjustments.
  

5. Keep Candidates and Referrers in the Loop

Communication is always important in the hiring process, but with referral programs it’s especially critical. Be sure to keep your employees in the loop on the status of their referrals, and do the same for the candidates they refer (of course, this should be standard for all candidates regardless of the source). Don’t make employees chase down your HR team for updates — be proactive.

6. Offer the Right Incentives

An employee referral bonus is most often a cash award, given to employees to send as they like. Those awards can be significant, which is effective if you’re in a tight hiring market and struggling to find great employees.

But you can also reward employees for successful referrals with other perks, like extra vacation days, an interesting or rewarding experience like vouchers for massages or trips, or anything else you can imagine. If you’re not sure what would motivate employees most, ask them directly! They might have some unexpected ideas.

7. Communicate Openly and Effectively

Ensure that employees know exactly how your referral process works — where they can find your latest job openings, how they can refer people they know, how long it typically takes to reach out to that person, what incentives they can expect and when they’ll receive those referral rewards.

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And communicate wins, like celebrating and sharing new hires, proactively with employees and the company too! Everyone likes to feel they’ve contributed to their organization and be celebrated for it.

8. Make Referring Potential Candidates Easy

Finally, to ensure you’ve truly created an attractive and effective employee referral program, make the user experience of your program as easy as possible for employees. If it’s difficult to refer someone, or to get their promised award, employees won’t bother to make referrals.

After all, they may be the ones getting a one-time award, but your company benefits much more from making your recruitment process more effective, so be sure it’s simple for employees to help you out.

And technology can help you make this process easy (and even fun): Cooleaf lets you incentivize employees to refer friends and family by creating a Customer Referral Award tied to reward points. So what are you waiting for? Create your own employee referral program today!