Why HR Should Start an Employee Referral Program

May 1, 2015 Zuman

Use employee referrals to strengthen your talent pipeline.How hard is it for your company to find the right people for open positions? Although many businesses use postings on job boards or LinkedIn to attract candidates, they may be overlooking the potential of employee referrals. Top performers likely know other great people who will be a good cultural fit for your organization.

Employees who are referred by other staff members cost less to recruit and are more likely to stay with your company longer. In fact, 47 percent of referral hires stay at the same job for more than three years, according to iCIMS. This indicates they have higher levels of job satisfaction than workers hired through other channels. The hiring process can be cut from 39 days to 29 days. Of companies that have referral programs, 36 percent said their last hire came from this channel, research from Evolv found.

If you're interested in making adjustments to your hiring process, an employee referral program may help you reduce the length of the hiring process and improve retention.

What Goes Into a Great Employee Referral Program?
Not all employee referrals programs are created equally, and your company will get out what it puts in. Most programs offer some sort of incentive to encourage employees to participate. Cash bonuses are common, but extra vacation time could also be offered. Companies need to strike a balance between giving people a reason to refer others without overextending their resources for the program, according to Business 2 Community. However, executives need to consider what great employees are worth.

Employee retention will be a more important concern for employers as millennials continue to enter the workforce. This demographic is less loyal to a single employer, but they want meaningful work. Referral programs can boost younger employees' attachment to companies because new hires will already know someone in the office. This increases the chance these new hires will be a good fit. In addition, relationships are a huge factor in whether people stay or leave a job, which is why referrals can boost retention.

Timeliness Is Crucial
If employees are trying to help a friend get a new job, they will be frustrated if the human resources department doesn't respond quickly. In many cases, hiring managers will take weeks to sift through resumes, and the lengthy process can make referees look bad. Additionally, companies could miss out on hiring a great candidate who was snapped up by another organization. Employees won't recommend someone else to work for your company if this happens. When implementing an employee referral program, you may want to set a specific timeline to follow up on applications. 

Establish Clear Rules
To eliminate frustrations from rejected applications, be clear about which employees are eligible to refer colleagues and what the qualifications for open positions are. If you offer a monetary bonus for referrals, you can consider staggering it by paying half when the new hire starts and the other half after he or she has been at the company for 90 days. Be clear about how incentives are given. In addition, there shouldn't be any ambiguity about how resumes are evaluated and how employees are informed when a friend gets hired. 

Is there a specific process employees have to follow to refer a friend? Any requirements should be clear and easy to follow to boost the effectiveness of the referral network. Staff members don't want to bend over backwards to give a referral. If it's too complicated, you risk low participation rates, which won't have the desired results on your talent pipeline. These programs work best when a substantial portion of your new hires come from referrals. In addition to rewards, employers can add gamification or contests to the program to make it more engaging.

When implemented properly, an employee referral program can become your best source of new hires. Your company can boost employee engagement and enhance internal relationships because workers will be more connected to their jobs. Referrals build on the community you already have in your organization. 

About the Author

Zuman

Zuman is the premium solution for HR, payroll, benefits administration delivering superior control, lower risk, and enhanced employee engagement for growing companies.

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