How to Create an Employee Referral Program [With Examples]

If you have been struggling to find the right candidates, you're not alone. When it comes to hiring, many recruiters and employers encounter similar problems for various reasons, for example:

• The job posts fail to deliver the intended messages to the candidates, or are not posted on the right platforms. 
• Candidates are more selective in applying for openings. 
• Candidates fail to meet the skill-set combination or job requirements that you’re looking for. 
• Some positions are hard to fill, especially in food service, education, childcare, elderly care, cleaning, and construction sectors.
• Other factors like employer branding, salary negotiation, hiring strategies, etc. 
  

If you've been experiencing these issues, employee referrals may be worth a try. As the most powerful source of finding suitable candidates, employee referral programs can give your recruitment efforts a significant boost while saving a lot of time. 

In this article, you will find the ultimate guide to internal referral - why it matters, how to develop an effective referral program in recruitment, and more. 

What is an employee referral?

By definition, an employee referral is when companies or organizations ask their existing employees to recommend some candidates from their existing networks. In return, these employees will get a referral bonus, typically a financial reward, if the company successfully recruits that individual. That is also how referral works. 

What is an employee referral program?

Simply put, this is an internal recruiting method in which employers encourage current employees, through referral incentives, to refer suitable candidates for job openings in their companies. 

5 benefits of employee referral programs: 

• Time-saving
  On average, external recruitment methods can take 55 days to successfully hire a candidate, whereas it takes only 22 days for the entire employee referral scheme.
  (source: LinkedIn Business)
• Better candidate quality
  Since your current employees know your company culture and work environment very well, they know exactly who will be the best cultural fit. Also, they will not introduce someone who fails to meet the basic job requirements.
• Improving (new) employee retention
  The better quality of hire, the better employee retention. Employees who are referred tend to stay longer with your company compared to traditional hires. The reason is that those selected from recruitment referral programs already know quite well about you through your existing staff.
• Reducing (existing) employee turnover rate
  Employees who make a candidate referral will feel they are part of the hiring process and that their opinions count. This in turn will make them more engaged and stay with your company long-term.
• Building your brand
  Think of it as word-of-mouth marketing. Job seekers tend to trust what your existing staff say about your company more than what you write in the job post. Hence, internal referrals can contribute to building a successful employer branding strategy.

Step 1: Understand the hiring workflow.

You'll first need to learn about all the necessary steps when it comes to referring an employee, including:

• Announcing the vacant roles 
• Receiving, reviewing, and shorting applications
• Interviewing suitable candidates 
• Making a final decision
• Sending out a job offer 

Typically, there's little difference between external and internal referrals, except for the referral bonus policy.  

Step 2: Establish clear rules and incentives.

Next, figure out exactly how the referral works within your company to avoid any misunderstanding or conflicts that may come from any side. 

Answering the following questions can help you set up an employee referral policy:

• Who can refer an employee? (i.e., any specific department, job level, or everyone can join the program?)
• Do you want to use only candidate referrals for every open role or specific positions?
• What is the maximum number of people that an employee can introduce?
• How can employees submit their referrals for recruitment, and when is the deadline?
• What is the reward for those making a successful referral? (e.g., cash, gift, vacation, etc.)
  

It's equally important to pay extra attention to the referral bonus policy because it can go a long way in motivating your staff. You'll need to make it clear, simple to understand, and valuable, so they’re more likely to recommend people from their network who are qualified for the vacant roles.

Step 3: Announce the employee referral program.

Now that you already have a clear idea of how the employee referral scheme will work, make sure all the employees are well-informed about this. You can send them an email, post it on the internal job board, or announce it in the meeting. 

It's also crucial to keep those who refer candidates up-to-date at every stage of the process. If the candidate is not selected, you should still send referrers a thank-you note for their time and suggestion.

Now that you might already know how to develop a referral program, here're some extra tips to make it work out for the best. 

💡 Keep it simple and straightforward.

One of the winning tips is creating an easy referral process that encourages your colleagues to do something beyond their normal job duties. The employee referral program policy, including rules, methods and rewards, should be easy to understand and apply. 

Below are several ways to keep this process simple:

• Place a resume drop box in the HR department’s office.
• Use an online employee referral platform like ERIN, Boon, RolePoint, Teamable, etc.
• Adopt a simple employee referral template. 
• Make an instructional video or presentation that details the employee referral program.

💡 Consider different types of incentives.

One of the best ways you can do to keep employees engaged in candidate referral programs is by effectively incentivizing them.

Here are 7 different types of referral incentives to boost employee engagement: 

• Financial incentives ( cash, bonuses and raises)
• Gifts (gift cards, travel vouchers, etc.)
• Extra days off with pay
• Wellness incentives (free healthy lunches, on-site health screenings, gym membership, etc.)
• Recognition and awards
• Learning and development stipend 
• Professional development opportunities

💡 Keep the employee updated.

As mentioned before, communication is a critical factor in making referral bonus programs work well in your organization. You need to keep your colleagues posted about the status of their referrals, so they will feel their suggestions are valued. This is also a great way to achieve a positive employer branding.

💡 Acknowledge good referrals.

Acknowledging employees' efforts to refer high-quality candidate is equally important for building a successful employee referral program. The most popular way to do so is by sending them a sincere thank-you email, no matter whether the referred candidate gets hired or not. 

You can refer to the email template below:

💡 Make use of social media.

Social media can supercharge your employee referral program in various ways. Let's say your co-workers have an average of 300 friends on Facebook, so multiplying this by only ten employees will generate about 3,000 prospects. In this way, you’ve got a solid chance of recruiting success based on how you are able to leverage your employees’ social media networks.

1. Accenture Employee Referral Program

Among the largest management consulting company in the world, Accenture involves their employees in the recruitment process and has a separate portal for their employee referral scheme (employeereferralprogramme.accenture.com).  

After logging into the site, the employee needs to enter all the candidate's details, such as name, D.O.B., address, educational background, work history, and other required information. They will then receive a C.I.D. number for tracking the status of the referral as well as a notification via email.

Referral rewards include cash (which depends on the level of employment and skillset of recruited employees) and other prizes like watches, shoes, gym bags, and T.V.s, also based on the number of successful referrals.

2. Google Employee Referral Program

At Google, their employee referral programs are supercharged by simplicity. They previously doubled the referral bonus from $2,000 to $4,000, but this strategy did not work. 

Instead, HR leaders at Google encourage their current staff to look through their networks and identify professionals by asking simple questions such as:

• Who is the best (coder/engineer/marketing specialist/etc.) you have ever worked with? 
• Who are 5-10 people you would want to work with again? 

By making the process simple and easy to apply, their new internal referral strategy has proved to be successful.  

3. Salesforce Employee Referral Program

The cloud-based software company takes a different route by organizing a get-together where employees invite friends or families who could be a good fit. The event, called “Recruitment Happy Hours”, serves as an informal introduction to the workplace and puts candidates at ease compared with formal interviews as usual. 

Another factor that makes their referral program achieve success is the reward system. Besides a cash bonus of 2.000 USD for every successful referral, Salesforce's employees also receive thoughtful gifts.

4. Other companies with the best employee referral programs

Still looking for other ways to supercharge your employee referral program? Check out the following companies that have the most genius ideas:

• InMobi
• Intel
• PURE
• Enterprise
• GoDaddy

— Originally written by May Luong —