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“Do you know anyone who might be a good fit?” If you’re hiring, this is a question you should be constantly asking.
Whether it’s in personal or professional settings, referrals have historically played a vital role in connecting people with opportunities. Companies that understand its value actively encourage their employees to recommend qualified candidates from their networks.
However, simply having an employee referral program doesn’t guarantee these results. We’ve even seen businesses where, despite providing cash incentives for successful referrals, only a few team members took advantage of the offer.
The key to making it work is how well it engages people to recommend candidates they feel confident about.
Different studies have shown that the quality of referred candidates is generally higher than non-referrals. In addition to significantly lower recruitment costs, referred candidates are more likely to accept offers and less likely to leave compared to other hires.
But how do you convince employees to tap into their networks in the first place? By making it simple, easy, and rewarding.
Determine the stakeholders that should be involved
When developing a referral program, Human Resources would be the first team to be involved. If you have a Talent Acquisition team, make sure to keep them in the loop as well. These teams can help set the guidelines to make sure the program aligns with the company’s policies and compliance requirements.
To set a budget for the program and the referral rewards, you may need a discussion with a senior HR resource or the Finance Department.
Establish guidelines to ensure employees understand the program requirements. Qualification could depend on being employed at the time of submitting the referral, staying with the company when the reward payment is due, or having properly followed the referral submission process.
This sets clear expectations for earning referral rewards.
It should be as easy as possible to submit referrals. If it takes too many steps, your employees are less likely to send in candidates.
The simplest way would be to ask your team to submit CVs through email. You can set up a dedicated email address or assign a person who would be responsible for handling referrals. Even if your company uses other communication channels like Slack or Teams, it’s best to stick to email for now.
Make sure to let your team know what information you need about the candidate. At minimum, it should include the following:
Most businesses I’ve encountered set referral rewards between £250 to £500. Some have even had a referral program without any financial reward.
This doesn’t quite promote the right activity. A referral program should incentivise employees to actively think about who in their network could be a potential fit to fill your vacancy.
You can set the rewards for successful referrals based on different criteria. For example, it can be given according to salary:
Other areas you can base the rewards on are:
While these rewards may seem high, they’re still considerably lower than the costs associated with other recruitment channels or the missed opportunities, lost revenue, and other impacts of not having the right person in post.
Tailoring the incentives in line with your top recruitment priorities will encourage the right activity in the right areas.
Rewards should be given out according to the rules for successful referrals.
If a successful referral is defined simply by the candidate being hired, the reward should be paid shortly after their start date.
It’s more common to see two-step referral programs. In this case, the first half is paid after the candidate starts, and the second half upon completing probation. Compared to a one-time payment, there’s less risk of paying the full reward only for the candidate to leave just after they started.
A referral program will only be effective if employees know about it.
Promote it regularly through your internal communication platforms such as email, Teams, Slack, or your intranet. Include it in weekly meeting agendas to keep it top of mind.
Use these channels to share information about the program, how to participate, and celebrate its success. You can even highlight the number of new hires made via referrals to encourage more people to join in. Just be careful about sharing details about who referred whom since they may want to keep that private.
Let’s say you’re speaking with an old college friend who’s looking for a job. If they’re active in the market, they may have already submitted their CV on platforms like Indeed or LinkedIn. Your recruitment team or an agency could easily pick up that CV, and you might also submit it as a candidate.
The best way to handle duplicates is to compare the timestamps of when your recruitment team and your employees entered the candidate into your system. Whoever submits first should be credited as the source of the candidate.
We had developed a referral program for a customer who was setting it up for the first time. The process for submitting a referral was through a central email inbox with the candidate’s CV, contact information, and the position they were being referred for.
To communicate the program, we created a “referral pack” that included details about the program, rewards, referral process, current job openings, and reasons to join the company. It also enabled employees to share key information with candidates, encouraging them to submit a CV.
Employees received £2,000 for each referred candidate who was successfully recruited. Following the candidate’s start date, the reward was paid in full in the employee’s next payroll.
By deliberately keeping the program simple, it was implemented quickly and the customer saw an almost immediate 300% increase in referral submissions.
Referral programs can be one of your most cost-effective recruitment channels. The fixed reward structure motivates employees to provide strong candidates from their network while reducing reliance on standard recruitment methods that come with ongoing costs.
It’s also a good indicator of employee engagement. If your employees are actively referring candidates, it likely means they’re happy to be part of the team. Otherwise, they wouldn’t recommend someone they know.
And as the research mentioned earlier already touched on, an effective referral program doesn’t just help address your immediate recruitment needs. It also sets your organisation up for long-term success by attracting higher-quality talent.
