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New hires sourced via referral programs produce 25% more profit for businesses

An efficient employee referral program can save on recruitment fees and time spent hiring new staff. This can have a significant impact on a business’s bottom line. It can cost up to $20,000 in fees and take hours to hire one staff member through a recruitment firm versus hiring someone via employee referral programs.[1]

Employee referrals are the cheapest and fastest way to attract and hire high-quality talent. Referrals offer a much higher chance of success because employees tend to refer people they know will do a great job and who will fit in with the company’s culture.

Employee referrals offer many benefits to businesses. Referrals uncover qualified talent leads, which lets businesses fill job vacancies faster, leading to lower costs and fewer hours spent on recruiting. When hiring referred candidates, talent managers can screen and interview fewer applicants since the candidate leads they have are already qualified by virtue of their connection to an existing employee. The more employees sourced through referrals, the lower the company’s overall cost of hiring new staff will be.

Loyalty to the business is a key trait of referred employees. 45% of referred employees are still in the role after two years, compared to just 20% of employees sourced from job boards.[2] Greater employee retention reduces the costs of rehire, retraining, and productivity ramping.

Referred hires are also known to be more productive and higher-performing. New employees sourced via referral program produce, on average, 25% more profit for their companies than other hire sources.[3]

To attract high-performing talent, the referral process needs to be simple, fast, and mobile. Mobile is now the preferred search method for job seekers and, for those without access to a PC, it’s a necessity. By making the referral process mobile, businesses can maximise their chances of attracting the best talent.

Mobile platforms make it easy for employees to refer open vacancies to their first-degree network connections. Mobile apps can send push notifications to the employee’s device in the morning during peak work commute times when most people are using their device. The employee simply swipes to refer the job, providing a much more efficient and enjoyable employee experience, and increasing the likelihood that employees will refer roles to their contacts.

It’s also possible to gamify the process, and make it fun and engaging for employees. For example, when an employee refers a hire, they can go into the draw to win weekly prizes, as well as being eligible for the standard reward a company may offer for a successful referral.

There are seven key steps to building an employee referral program that delivers bottom line results:

1. Define the problem. Understanding the problem makes it easier to design the right solution and measure success. For example, businesses may need higher quality candidates, a larger pool of candidates, or a better recruitment process.

2. Determine target roles. Identify the business areas with roles that are hard-to-fill and/or ripe for referrals. Decide whether to target certain groups or any referral. Having this knowledge will help when deciding how to reward referrals.

3. Reward. There are inherent rewards for employees who successfully refer candidates but it is also important to offer a tangible reward. To decide what those should be, consider what competitors are offering, what will appeal to your employees, and what will fit the culture of your organisation. Generally there is a tipping point that will make employees sit up and take notice, however they do not necessarily have to be linked to financial rewards.

4. Make it simple. A common stumbling block in many referral programs is too much red tape and poor referral mechanisms. By making it as easy as possible for people to understand and participate in the referral program, it is far more likely to generate positive results.

5. Launch it. Communications and change management are critical. Many companies spend a long time on design and invest significantly in the program itself, only to underestimate the communication strategy required. As a guide, it should take just as much time to plan the launch as it does to design the program.

6. Remind. An employee referral program that no one remembers will not generate many candidates. It’s important to remind employees regularly about the program and ask them to think about people they may know in their network. Reminding employees regularly about jobs and potential referrals can be more effective than increasing the reward amount associated with a referral.

7. Measure. To understand whether the employee referral program is delivering results, it’s important to measure the number of candidates recruited through the referral program. Long-term, it is useful to measure those employees’ performance versus those recruited through traditional means.

Employers that make it easy for their staff to refer jobs are more likely to achieve strong benefits from their employee referral program.

About the author

Rob Van EsRob van Es is the chief operating officer of REFFIND, an employee engagement technology company. 





[1] The undercover recruiter (2016)

[2] Jobvite Index (2016)

[3] The Alexander Group (2015)

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