This article on employee referral programs was originally published in February 2015. Relevant copy and statistics were updated in August 2024.
One of the biggest challenges in recruiting employees is finding reliable candidate sources. 77% of HR professionals say they’ve been having trouble bringing in applicants for full-time roles. As a result, many are searching for new recruiting strategies or revisiting old ones. If you’re in the same boat, you could benefit from an employee referral program.
Employee referral programs often fly under the radar, but their benefits can be significant. But how do you make referred candidates a bigger part of your talent pool? From the size of your referral bonus to your employer brand, all of it’s a factor in the success of your program.
What Is an Employee Referral Program?
Employee referral programs are a structured initiative companies use to find candidates with the help of their people. Employees are incentivized to recommend people from their networks —former colleagues and peers, usually —for open positions at their current organization. Typically, those are financial incentives that are paid out if the referred candidate is hired and employed for a period of time, but they can also include additional paid time off or recognition.
47% of HR professionals say it’s much more difficult to recruit this year compared to last year, with 60% pointing to fewer applicants as the leading cause. So it’s no surprise that improving candidate sourcing capabilities has emerged as a top priority for many of them.
A successful employee referral program can help increase the number of applicants, speed up the hiring process, and reduce hiring costs. It also improves your chances of hiring someone who’s not just a good fit but a great one. If your program includes enticing incentives, it can
10 Facts About Employee Referral Programs
- 82% of employers use employee referrals to source candidates.
- 88% of employers say employee referrals are their candidate source with the highest ROI.
- Referred employees have the highest applicant-to-hire conversion rate. They make up only 7% of applicants but account for 45% of all hires.
- The average retention rate among referred employees is 46%, compared to 33% for candidates hired through job boards.
- Referred employees stay at their jobs 70% longer than other employees, with 50% staying three years or more.
- When you leverage employees’ professional networks for candidate sourcing, your talent pool could be as much as ten times larger.
- Hiring referred employees can reduce time-to-hire by as much as 31%, or 13 days, and save an average of $1,000 in hiring costs.
- Companies that hire referred candidates can reduce turnover by as much as 20%.
- 75% of companies use automation to manage their referral programs.
- Referred candidates can strengthen company culture, as employees are more likely to recommend candidates who are a good cultural fit.
Bonus Stats
- Thanks to the cost savings during the recruiting process, their high productivity, and low turnover, referred employees are 25% more profitable.
- The average employee referral bonus is $2,500, with 70% of employers offering incentives ranging from $1,000 to $5,000.
- 67% of employees say they refer candidates to help out their colleagues and their business. Just 6% say financial incentives were their top motivator.
Like the look of those numbers? Most employers and TA professionals do.
We know better than most that obtaining the necessary resources to get any HR initiative off the ground can take some time, so here are a few quick and free ways to start optimizing your employee referral program today.
3 Tips for Effective Employee Referrals
1. Tell everyone about it.
You can’t increase the number of referrals you receive if your employees are unaware of your referral program. Start by sharing details about the program through as many channels as possible, like email, team meetings, newsletters, and the company intranet. Some companies even accept referrals from their clients and vendor partners. In that case, you might even employ a targeted social media campaign to let your audience know that referrals are open to people outside the company.
In your communications, highlight how the program benefits referrers, including any incentives or rewards. You might mention some of the statistics we shared, like the retention and productivity benefits of hiring referred candidates. If your referral program is new or revamped, you can host a launch or relaunch event to get your employees excited and let them know what’s in it for them.
Get your managers and leadership involved in actively promoting the referral program and make it easy for your people to find information about it. Talk about it regularly during company meetings and share success stories to keep the momentum going.
2. Track referrals —and referrers.
While you’re more than likely already tracking employees who were referred candidates, you should also monitor which employees have referred candidates successfully. When you get even just one good referral from someone, be sure to take note. That gives your team more information to work with when a referral comes through.
If you’re using an applicant tracking system (ATS) to manage sourcing, your employees can easily share job openings with their networks. When these applications are submitted, your recruiting team can immediately see that the candidate was referred and who referred them. That designation remains in their employee profiles so your team can see at a glance whether employees are reliable referrals.
Be sure to respond to referrals and referrers in a timely manner —they’re expecting to hear from you. When you leave them hanging, you run the risk of alienating a potential candidate and hurting the morale of an engaged employee.
3. Put your employer brand on display.
While some referred candidates may be familiar with your company, there’s an equally good chance they’re not. However, because they were referred to you by someone who does know what you’re all about, there’s a high probability that your employer brand will resonate with them. You can determine if it does resonate during your first conversations with the candidate.
Here are a few ways to work employer brand into the discussion:
- In your first outreach email, share a few details about your company’s mission, values, and culture, as well as a resource like a brand video.
- In interviews, ask referred candidates what made them ask for or accept the referral offer.
- During interviews, ask candidates what they know about your employer brand already.
A great employee referral program requires brand ambassadors at its core, so remember to always show your appreciation for your brand’s biggest fans — your employees.
Want to learn how you can start an easy-to-manage employee referral program at your organization?
Sign up for a demo of ClearCompany’s ATS to see our referral tools in action. Ask your rep about our AI-enhanced candidate sourcing tools.
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