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What is an employee referral?

4 benefits of employee referrals

What is an employee referral program?

How to create an employee referral program

What is employee referral

An employee referral describes the process where existing employees recommend a candidate for a job opening from within their existing network.

Often, the referring employee receives incentives for recommending a successful hire. 

What is an employee referral?

With employee referrals, businesses can find talented and skilled candidates by leveraging the knowledge of current employees. The internal method of finding candidates to fill open positions is usually a structured program. 

An employee referral program policy is an effective recruitment method that uses existing employees to find trustworthy, qualified candidates in exchange for a referral bonus.

4 benefits of employee referrals

The primary goal of incorporating an employee referral program into the hiring process is to introduce qualified candidates for open roles, but there are several other benefits to consider. 

Boost quality of hire

Existing team members have a grasp of the company culture, are familiar with the organization’s mission, and have a deep understanding of the business structure. Armed with this knowledge, employees can refer the right candidate for both the job and the business as a whole.

Improve employee retention rate

An ill-suited candidate leads to churn and wasted resources as they struggle to complete the job effectively. However, a well-suited candidate is reflected in a high retention rate. One study shows that only 25% of employees sourced from job boards remained with the company for longer than two years, while 45% of referrals stayed for four years (or more).

Save time and money

The talent pool has expanded in the modern working world, and quality candidates often have more power than organizations looking to hire. In turn, human resources have to commit more time and money to the recruitment process.   

Employee referrals serve as a pre-screening process, saving time on the sourcing and screening phase of hiring new employees. It saves time and money compared to more costly and time-consuming recruitment strategies. From here, successful candidates can begin the onboarding process and start filling out the job description. 

Build employer brand

Job seekers are more likely to trust the experience of someone in their existing network than the elaborate promises of hiring managers. When an employee speaks to potential candidates and shares their own experiences, it boosts business brand awareness and attracts top talent for future job openings.

Improve diversity

Using an employee referral system can also improve diversity. If the organization intends to improve workplace diversity, then hiring managers should incorporate these goals into their referral program. For example, ask explicitly for diverse leads and referrals and approach minorities for candidate recommendations. 

What is an employee referral program?

An employee referral program is a strategy encouraging existing employees to refer the best candidates for a job by offering incentives and rewards. 

The referral process is structured and organized, leveraging the knowledge and connections of existing employees to find a strong fit. 

The program can run adjacent to traditional hiring methods, such as posting on social media, LinkedIn, and job boards, or it can function as the first step in the process of finding new hires.

Consider the following incentives to offer employees;

  • Cash employee referral bonus after the candidate has been working for a certain period of time
  • Partial bonus upon new hire referral, and the rest of the bonus after a specific time period
  • Option of PTO instead of cash bonus
  • Gift cards for recommending a successful hire

How to create an employee referral program

Existing employees have the potential to be the best source of successful job candidates. There are various ways to create a successful employee referral program, but the following steps form a structured template. 

  • Determine the hiring goals of the company and assess the role of the referral program
  • Research referral tools and how to incorporate them into the hiring process
  • Ask employees about their preferred incentives
  • Share the new referral program with your team and allow them to ask questions

At Deel, we’ve built a platform for today’s world of work, helping the HR team hire candidates from around the world and onboard them seamlessly into the organization. We’ve also built our own referral plugin, to make the process as easy as possible.

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