Why Every Company should Utilize an Employee Referral Program

What would you say is your most effective recruiting tool?



Maybe you prefer to do your networking in-person and go to professional events around your city.

Whatever your preferred method, you chose it because it’s proven to be a reliable pipeline of qualified talent for your organization. People are a company’s most valuable resource, so it only makes sense that you utilize strategies that you know are effective.

That said, how many other recruiting methods have you not really delved into that have the potential of also bringing in amazing employees to your team?

I’m talking about an Employee Referral Program where employers reach out to their employees to see if they know anyone that would be a good fit for the team. Although a handful of companies say they have an employee referral program, they’re usually not as fleshed out as they should be and aren’t brought up with employees as often as they should.

We’re going to be discussing the benefits of a proper employee referral program, as well as how to make the most out of it!

What is an Employee Referral Program exactly?

What is an Employee Referral Program exactly

An employee referral program is a term used to describe when employers reach out to their employees to ask if they know anyone in their network that would be a good fit for any of their open positions.

It helps the employer because they don’t have to spend as much time finding a candidate, and helps the employee by giving them the opportunity to receive a monetary referral bonus. Though these benefits are only the tip of the iceberg, there are many other great advantages of instilling a proper employee referral program.

Benefits of Employee Referrals

Benefits of Employee Referrals

  1. Confidence in your Hires

One of the biggest benefits is that the hire is going to be a direct reflection of the employee, so you know that they aren’t going to be referring someone just because they’re a friend or because they want to do someone a favor.

An employee knows that if they’re going to refer someone, they better be the brightest and most qualified person for the position.

  1. Less time spent Recruiting

What is the average Time-to-Fill for your organization?

For most professional organizations, it takes about 42 days to fill an open position.

Having a candidate come in organically frees up your hiring teams’ schedules to focus on other tasks, and means that you’ll be able to get a qualified applicant in the door much faster than before, which leads to a candidate that is hitting full productivity much faster.

  1. Cut Costs

Recruiting is expensive.

Posting job ads cost money, but employees telling their friends and family about an open position doesn’t cost a thing.

This gives you the opportunity to cut back on not only recruiting costs but also on money spent on outside recruiting firms. The only extra costs are the money spent on the referral bonuses, which are a fraction of the money that you end up saving. 

  1. Increased Levels of Employee Retention

Increased Levels of Employee Retention

Whenever a hire comes in that was referred by another employee, that lets the office know that the company trusts them enough to make a full-on hire based on their employees’ judgment.

This builds a bond with the employees and makes them comfortable knowing that they’re in a workplace that values their thoughts and opinions, making them feel like they’re a valued part of the company versus just an employee.

This feeling of trust is hard to find in many employers, which will lead them to be more likely to stay in their current position instead of finding a new one.

  1. Better Culture Fit

You work hard to instill an effective workplace culture among your team, so the last thing you want is for someone to come along and ruin it.

With an employee referred hire, you know that they are close an employee in your organization, which shows that they have the potential to get along with everyone else in the office.

  1. Get Access to Hard to Find Skills

Get Access to Hard to Find Skills

Let’s face it when you’re working in a field that designates the need for many highly-specialized positions, finding candidates isn’t the easiest job in the world. In fact, it can be downright impossible to find someone with the skills that aren’t already with a company.

That’s where an employee referral program comes in handy.

Let’s look at this example:

Say you’re looking for a Software Developer that is fluent in Ruby on Rails. So you do a bunch of extensive searching on LinkedIn, your networks, etc., but to no avail.

The Software Developer on your team, on the other hand, is part of a professional group that meets once a month that would surely know someone that has the skills that you’re looking for.

But if you never let your Software Developer know that you’re looking for someone that meets those requirements, then they wouldn’t be in the position to help you by handing over referrals.

Employee referral bonus

Now that you have a better understanding of the benefits that come with a well-built employee referral program, it’s crucial that we go over how to properly reward your employees for recommending some great talent.

It’s important that you understand that you should reward your employees with money and not with a small gift card to Starbucks. As nice as your employees may be, taking the time to scour their networks for a good hire can get tiring and they will need some incentive for going the extra mile.

That’s why it’s recommended that you make your employee referral bonus in the ballpark of $750-$1000.

Although it may seem high, the money you save by foregoing a large part of the recruiting process makes it all worth it.

Closing thoughts

Your employees are more than just workers, they are family. So it’s important that you trust them enough to understand what qualities an incoming employee should have.

Take some time to really flush out your employee referral program, then let it be known to your team whenever you’re looking for a new employee along with the monetary reward that comes with a successful onboard.