5 ways to create an employee referral program that works

October 10, 2023

If you need to hire more people and can’t seem to find enough of the right candidates, then maybe it’s time for a fresh approach.One way to aid the hiring process is to implement an employee referral program to leverage the personal networks of existing employees and in some cases business partners or vendors.A referral program gives existing staff members opportunities to play a more active role in recruiting practices and often reinforces your company culture. Hiring people who have an existing connection within your company can help with retention as well.“Based on our own experience, we have found referrals are one of our most successful recruiting sources,” says Connor Cross, director of human resources for Syndeo. “They are typically a great fit for us culturally which, often is more impactful than the necessary technical skills or work experience.”Syndeo implemented an employee referral program in early 2021. Now, ours has become a case study in how effective a referral program can be. The bulk of the 11 people we have hired so far this year came from a mix of referrals from internal employees, clients and business partners.“That speaks to how well that works,” Cross says.Ready to adopt an employee referral program of your own? Here are some tips.

  • Employee referral programs are not one size fits all, so they should be customized to reflect your company’s culture, goals and hiring needs.
  • Determine the bonus structure of your program. Decide whether you want to pay a one-time bonus for hiring referrals or in segments, such as a portion upon hire and the remainder when the new hire completes a 90-day probationary period. Perhaps you want to incorporate a mix of financial and non-financial incentives, such as additional time off or a prize of some sort.
  • Decide whether referral bonuses will be paid at a flat rate for all positions or on in a range. In that instance, a referral bonus for an entry-level position might be less than one paid to someone who refers a person for a management-type of position.
  • Analyze turnover trends. You may consider incentivizing employees who refer someone who stays with your organization for a year, particularly if turnover typically takes place within a person’s first year.
  • Consider offering a larger bonus for employee referrals for vulnerable departments and/or hard-to-fill positions.

Want more information? Read these tips from jobs platform Indeed.com. Also check out these suggestions from the Society for Human Resource Management.

Potential unintended consequences of employee referral programs

While employee referral programs can yield positive results for your organization, you still should be aware of some potential – yet likely unintended – pitfalls.Chief among them are possible diversity issues and disparate effects on protected groups that are covered under Title VII of the Civil Rights Act of 1964. You can reduce the potential for unintended imbalance in your company’s applicant pool by analyzing the employee referral program yearly.Also, be careful to not rely only on your employee referral program for new hires and instead incorporate a variety of recruiting methods. Candidates still need to be vetted for their skillset, experience and culture fit for your organization regardless of whether they are a referral or contacted through other means.Any discrepancies in your recruiting practices should be adjusted accordingly, so you are still reaching and attracting a diverse group of candidates.Other issues can arise if you limit participation in a referral program to a select group of employees and not the entire organization.Meanwhile, hiring in general continues to be a widespread challenge for employers. So you may need to consider implementing other creative recruiting practices along with an employee referral program to address your hiring needs.About us: As the Heartland’s leading employer services company, Syndeo partners with local business owners to help them minimize risk, improve efficiency and maximize profitability allowing them the freedom to focus on growth and fulfilling their mission. Syndeo fulfills its mission by taking on all of the HR responsibilities for our clients’ workforce, including employee relations, benefits, risk management and payroll. Winner of the 2020 and 2021 Best of HR Services Award through ClearlyRated for providing superior client service. See our ClearlyRated profile here.

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