Employee Referral Program – Best Way To Hire New Employees? 

Do you know that your employees can bring the best talents to your company? Do you want to leverage the network of existing employees to find better people? Then it’s high time to start an employee referral program.

Employee referral programs are something a lot of people aren’t familiar with. A lot of companies offer them, but they aren’t very well-known or used.

Employee referrals help you find employees and also save you money by giving your employees incentives to help you out.

As you might guess, the employee referral program is closely tied to job satisfaction. That’s because they are a clear expression of trust in employees by their superiors.

The more satisfied their workplace employees are, the higher their likelihood to participate and refer others. So here we go, I’ll show you how it works.

What is an Employee Referral Program?

An employee referrals program is a strategy for sourcing candidates for open jobs. It’s an employee benefit, which is designed to give current employees incentives to refer qualified candidates from their network. 

They provide companies with the most qualified and engaged talent in the location where it’s most needed.

This process results in faster time-to-hire and lower costs per hire. Many of the best candidates come from word-of-mouth referrals, so they remain a popular method of recruiting top talent.

How Does an Employee Referral Program Work?

Employee referrals are an underlying method of selecting new potential employees for a company. This is an effective way of finding new employees, even though it is an inexpensive one. 

A successful employee referral program can help a company in attracting and retaining high-performing employees. An employee referral program works on a simple principle.

A company rewards an employee for referring a candidate who eventually gets hired by the company. 

The program can be as simple as a bonus for every successful employee referral. Furthermore, it can involve a tiered bonus system that rewards employees with better jobs and higher salaries if they refer a certain number of people at one time.

What Are the Benefits of an Employee Referral Program? 

1. It’s a great way to find new employees

Employee referrals are a great way to find new employees. If you have a solid employee base, there’s no better way to find qualified candidates than through your employees.

According to Apollo Technical statistics, 88 percent of employers recognize employee referrals as the best way to find quality candidates.

Companies that depend on talent to get the job done need a steady supply of qualified workers. HR departments can use employee referral programs to recruit new workers for nearly any job, from sales to engineering to management.

2. Your team can help build your company’s reputation and revenue

Your team members are part of your company’s DNA. After all, they do much of the work that helps your company keep growing. Employee referrals are great for helping to build your company’s reputation and revenue, along with building a great team.

A company that makes an effort to be a great place to work gets noticed by talented professionals. If your team loves their jobs, they’ll spread the word about what it’s like to work with you, which is priceless when it comes to recruiting. 

3. Increases employee diversity

A major benefit of employee referrals is the ability to ensure this process reaches all niches of the community. Increasing employee diversity is a hot topic right now. Besides, diversity is an asset to any team. 

Your existing employees are likely to share similar backgrounds and make similar referrals.

This can reduce the diversity of your workforce. Introducing an employee referrals program encourages a wider range of candidates, creating a more diverse workplace and greater innovation.

4. You’ll increase employee satisfaction and morale

Your employees may be among the best recruiters for your open job positions. For an employer, there are many benefits to having a formal employee referrals program.

An employee referral program is a great way to not only hire the best talent but also develop exceptional employees. 

The fact that your employees will share information about the company and recommend it to their friends will help them feel closer to the organization. This will boost morale and help foster an environment where everyone is on the same page. 

5. You save money on advertising and recruitment agency fees 

According to a statistic by Clutch, an employee referrals program can reduce your recruitment costs by more than 55%.

A referral from an employee will be much cheaper than advertising the job and sourcing candidates from recruitment agencies.

Consider this – would you rather reward your employees with a few hundred dollars than pay an agency thousands? This is just one of the benefits of an employee referral program. 

6. Keeping referrals in-house gives you a better sense of the employee’s character and work ethic  

While an employee may be a rising star in the eyes of their boss, they may not be in the eyes of the business where they are employed.

And prospective employers at other organizations may not be familiar enough with your personnel to adequately evaluate them. 

You may learn more about each employee’s abilities, character, and work ethic by keeping referrals within the company.

Having an employee refer you to someone is like having your best friend introduce you to their best friend. It automatically adds credibility to that other person — especially when it comes to candidates.

7. Speed up the recruitment process

The recruitment process is often seen as slow and it can take a lot of time. After all, you need to find top talent and to do that, you need to post the job on LinkedIn, Indeed, etc. This takes time, money, and effort. 

If you have an employee referrals program then you’re more likely to hire genuine talent who has been recommended by an existing employee – someone who believes that that person will be a great fit for the company.

How To Set Up Your Employee Referral Program

1. Let your employees know what the program is

We often find ourselves unable to get the word out that we are looking for new employees. It’s because, unlike in our personal lives, most people don’t tend to talk about their jobs. 

Well, imagine how easy it would be if your employees were actually working towards filling open positions. Which is exactly what an employee referral program does.

Let your employees know about the employee referral program. Tell them what positions you are looking to fill, what’s in it for them, and how long the program will run.

2. Set clear and easy employee referral goals

Creating your employee referral program is easy, but making it work isn’t. If you want the program to be successful, you will need to make sure it’s easy, clear, and unique.

You also need to earn the trust of your employees by teaching them how the program works and what you expect.

Choose 2-3 goals that align with your recruiting strategy and communicate them in your program launch materials.

Recruiters should use these goals to explain the value of referrals to employees while hiring managers can rely on them to judge the efforts of their team members.

3. Reward achievers

There is usually a big debate about how much to spend on rewards. Some companies spend as little as possible, and some spend a lot more.

Money isn’t always the best motivator whether it’s rewarding an employee or rewarding an advocate who refers a successful candidate.

I recommend setting up an employee referral program where you reward different kinds of circumstances around the referral process.

In addition to a small financial bonus, you can also give your employees recognition for referring successful candidates (a prize, an acknowledgment, etc.). 

This way you can make your employee referral program engaging and attractive while staying within your budget.

Rewarding the achievers will do wonders for your employee referral program.

First, it will attract more people to join in and start referring their friends. It will also make sure that people are focusing on finding qualified candidates. 

4. Seek out regular feedback from employees and referrals

Employee referrals are a proactive way of recruiting new talent.

Conventional wisdom says that employee referrals are the best way for companies to hire high-quality candidates. But many still struggle with designing an effective program. 

The most effective employer referral programs are the ones that are agile and regularly receive feedback.

Listen to your employees and referrals. Ask them questions and collect information. Then you can use the data to make future changes to your program to maximize your referral efforts.

6. Measure and maintain the program

Employee referrals are one of the most cost-effective channels for recruiting top talent. But building and managing an effective employee referral program is not a straightforward process. Its success depends on how well the employer measures and maintains it.

A great employee referral program is easier to maintain than you might guess. If you’re asking how to measure an employee referrals program, the key is to do it consistently. Don’t leave it to your employees to report the referrals on their own. 

Send an email survey every few months that ask your employees how many successful referrals they’ve made and how many new hires were from these referrals.

You can also lay out some basic questions about the referral program that employees can answer as a group. 

This lets you easily determine if employees are aware of the program and whether you need to make any updates.

Challenges in Running an Employee Referral Program

It’s a common challenge for businesses to find the right candidates to fill jobs.

Employee referrals are a great way to find quality candidates since they are usually recommended by people who are familiar with the work environment and have an understanding of the important candidate requirements. 

A big challenge in operating an employee referral program is ensuring that employees who refer candidates do so because they believe in them, rather than because they want to get a reward. Among other challenges, there are the following:

  • Securing your employees’ trust
  • Paying employees who recommend the right candidates
  • Lack of clarity in the program
  • Protecting yourself from lawsuits initiated by unqualified candidates
  • Firing and dealing with the backlash
  • Getting other employees to come forward with suggestions
  • Accurately tracking the performance
  • Lack of information and interest

All these can cause credibility issues for the employees, as well as for the company. If a company isn’t careful with this program, it can mean a large number of fines and penalties, not to mention the loss of confidence from the general public.


Can organizations use AI to optimize their employee referral program?

Employees have insider knowledge about the company and the people they work with, which makes them ideal candidates to help source new talent.

Organizations can use artificial intelligence to analyze data coming in from various sources during the recruitment process to recommend the right candidates for a position.

What can be achieved through an employee referral program?

An employee referral program is important for all organizations because it can help organizations attract higher-quality employees at a lower cost with better performance, and faster time-to-productivity, than external hires.

It’s also a great retention tool for existing employees, which increases the value of this HR strategy even more.

What’s in it for the employee?

Employees who refer quality candidates to the company receive a reward.

As an employer, draw up an agreement that spells out who gets what if a referral results in recruitment. This will clarify who gets paid when and how much. 

Make Your Employee Referrals Count

There must be a detailed plan in place for an employee referral program as it becomes more popular. This will keep the motivation of potential employees and the feedback from referrals up-to-date and valuable.

There’s nothing wrong with looking to your current employees for potential new hires. They already know your culture and what matters to you, and their word carries a lot of weight when it comes to hiring.

Finding a good match is often the best way to ensure referrals become hireable candidates. 

A successful employee referral program allows employees to build their professional network, and gain recognition for their efforts. In addition, it boosts their ability to deliver high-quality prospects if they have the right skills and traits to fit in your organization.

You should also learn more about employee assistance programs. In the article, you’ll learn how it works, its benefits, and implementation strategies.

Thanks for reading.