4 Factors to Consider When Building an Employee Referral Program

Are you thinking about building an employee referral program at your company? If so, smart decision. Employee referral programs are an incredibly lucrative source of great talent. Your best employees have a network of former colleagues, friends, and classmates who are just like them and a great employee referral program enables you to tap into those connections.

Hireology found that folks referred by existing employees are much more likely than non-referrals to become candidates and hires. Among Hireology customers, 38% of referred applicants move onto the candidate phase, compared to 17% of non-referrals. And 11% of referrals were actually hired compared to only about 2% of non-referrals. Ultimately, a great employee referral program helps you fill your open roles with qualified talent faster.

But getting your referral program right means you need to put thought into how you structure it. For example, how much will the reward payout be? How soon after the candidate is hired will you pay the reward? Getting the answers to these questions right will play a big role in motivating your employees to actually participate. Here are a few things to consider when building an employee referral program:

Type of Reward

Start by defining the referral reward — whether that’s with cash, a gift card, or a non-monetary bonus like extra PTO days. While the most common reward comes in the form of cash, the reward you choose should align with the culture of your company and the type of role you’re recruiting for. For example, if you’re hiring for high-turnover roles like a seasonal sales associate, a day of paid vacation or a gift card to the lunch spot next door might be enough to get the referrals you’re looking for.

Value of Reward

Similarly, the value of your reward should also align with the type of role you’re looking to fill. As a rule of thumb, the harder it is to fill the role, the higher the payout should be. For the high-turnover roles mentioned above, the value of your reward can be within the $25-$150 range. Whereas hard-to-fill roles like executives or software developers typically require a much higher reward — anywhere from $2,000-$10,000 — to fill. For more details on exactly how much you should payout for specific roles, check out this chart.

Payout Timing

Next, determine the timing of your reward payouts. For smaller rewards, you should pay shortly after the new hire accepts an offer. People aren’t going to participate if they have to wait several months for a small gift card. For harder-to-fill roles, wait at least 30 days to ensure that the person you’ve hired is truly the right fit. As another option, some companies offer half of the reward immediately after the offer is accepted and the rest of the reward once the employee has been on board for at least six months. That way, employees will get an instant reward for their referral, but they’ll also have incentive to refer people who are actually qualified and a good fit for the position.

Eligibility Requirements

Lastly, define the eligibility requirements. For most organizations, recruiters or other members of the HR team as well as leadership are not eligible to receive rewards for referrals. It should be a part of these folks’ jobs to find people to come work for you. Save your bonuses for the rest of your organization who likely know people who would be a great fit for your company but might need an extra boost of motivation to reach out.

Although the economy is recovering and folks are getting back to work, hiring still isn’t easy. Many companies are finding that you need to make changes to your culture and hiring processes in order to attract talent in a competitive market. Implementing an employee referral program is a really easy change you can make now that will get you in front of more job seekers and result in a positive ROI.

If you don’t have a program in place yet, Hireology can help. Our recent acquisition of EmployUs makes us a leader in the employee referral space. With Hireology, you can get a great referral program up and running while also providing applicants and candidates with a positive hiring experience that moves quickly. Don’t wait, schedule a demo today.



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