Have you ever thought that when you’re posting your job ads, you’re spending money to advertise to people you already know or could know through your colleagues’ network? In this guide, we explore how you can leverage employee referrals and boost your hiring efforts with the help of your coworkers.
What is an employee referral?
When an existing employee or external partner (e.g. a client) recommends a candidate, then this candidate is an employee referral. In most cases, referred candidates don’t follow the traditional application process; instead of responding to an interesting job ad, someone they know who’s also connected to the company will submit their resume on their behalf. Then, the hiring team will determine whether they’re a good fit following the same practices as with the rest of the candidates: reviewing their resume and professional background, evaluating their performance on role-specific assessments and conducting interviews with them.
What is an employee referral program?
This is a more structured way to organize how your company requests and receives employee referrals. When you don’t have an employee referral program in place, your coworkers can still recommend potential good candidates, but when it happens on an ad hoc basis, you can’t rely on referrals for your hiring efforts. On the other hand, when you run employee referral campaigns, you add one additional tool to your recruiting strategy. In other words, you’re one step closer to finding your perfect hire.
The benefits of employee referral programs
Here are the main reasons why you should consider building an employee referral program at your company:
With referrals, you can recruit…
… faster. In many cases, when your coworkers refer someone they know, they can already vouch for that person and make sure that this person meets the minimum requirements for the role. This means that you can skip the initial job advertising and resume screening phases and go straight to speaking with the referred candidate. Another interesting statistic from Glassdoor shows that candidates who’ve been referred are more likely to accept a job offer (by anywhere from 2.6% to 6.6%).
… at a lower cost. Since you move faster through the hiring stages, you naturally reduce the related expenses, too. For example, instead of paying an external recruiter to give you a shortlist of qualified candidates, you can ask your coworkers to recommend people with the right skills at no additional cost (or a lower price if you offer a referral bonus.) by filling positions faster, you also reduce the costs associated with an open role.
… better culture fits. If you’ve done a good evaluation, you know that your new hire can do the job, but how confident you are that they will fit with the team and the company? When this candidate, though, is a referral, they already have an idea of what the company culture is like and they’ve chosen to be part of it. Employee referrals improve retention, as employees join a workplace where they’re already familiar with at least one person and know what to expect. Increased retention isn’t only about candidates; current employees who make successful referrals also tend to stay longer.
… for hard-to-fill roles. For some positions, you might post a job ad and quickly get numerous good applications. Or, you might browse a portfolio site and instantly find top-notch professionals who match your criteria based on their work samples. But for other roles, hiring is not that simple. Whether you took over a large project and need to scale up your teams fast, or you’re looking for hard-to-find skills in an intensely competitive space (such as the tech scene), you could use some extra boots on the ground. In these times, your coworkers can act as your hiring buddies, by identifying potential candidates in their network – that’s an additional candidate source for your hiring process.
How to set up an employee referral program
To reap the benefits of employee referral programs, you must mesh them seamlessly with your overall recruiting strategy. Here’s a step-by-step guide to building an employee referral program that works:
1. Choose when to ask for referrals
First, decide when you want to use referrals to find qualified candidates. Will you ask for referrals at the beginning of the hiring process or will you first try the more traditional recruiting methods, like job advertising? Do you want to use them for every open role or only for specific positions that are harder to fill?
These questions will be easier to answer once you’ve set your hiring goals. For example, if you want to recruit candidates faster than usual, it makes sense to ask for referrals right away, as they’re proven to reduce the overall time to hire.
It’s also important to consider how hiring processes for a specific role have worked in the past. Let’s say you often hire new designers at your company and lately you’re struggling to find good candidates. This is a hint it’s time to look into new candidate sources – such as referrals from current employees. On the other hand, if you’ve always found promising designers on portfolio sites, there’s no need to change your hiring habits.
2. Communicate your employee referral program
The effectiveness of an employee referral program depends on how engaged your coworkers are in the process. You need to ensure that they know:
- How to refer someone (and that you’d like them to refer someone, to begin with).
- Submitting a referral is easy and quick.
- What the requirements of the role are.
As long as you’ve structured and communicated the process effectively, your employees will respond likewise, making for a more successful employee referral program. Here’s how you can do it:
- Describe the role and the profile of your ideal candidate. Whether it’s via email, a messaging app or intranet, let your coworkers know what you’re looking for. Include important details, such as the job title of your future hire, the team they’ll be working with, their main job duties and the skills and knowledge they need to have.
Check out this employee referral program sample email that you can customize to share your job openings with your colleagues and ask for referrals. If you also want to get candidate recommendations from people outside your company (e.g. business partners, clients, etc.) use this external network employee referral email sample instead.
- Explain how employees can submit their referrals. Asking your colleagues to refer candidates is the first step. Now you have to tell them how they can do that. Make sure the process is clear and fast. If it’s long and complicated, they may not bother. In other words, don’t ask your colleagues to do the job for you; rather, they just need to provide you with the candidate’s profile (e.g. their resume or LinkedIn account, whichever is easiest) and contact details and you can take it from there.
You can use this employee referral email template to ask your colleagues quick questions about the person they want to recommend for a job.
- Assess and contact referred candidates. Once you see interesting candidates showing up in your inbox, it’s time to evaluate them. If their profile matches your requirements, follow your regular hiring procedures (e.g. schedule an interview or send them an assignment). If, however, you find any dealbreakers, let the candidates know that you won’t consider them for this role – but first, make sure they know they have been referred or explain how you found their profile. Here’s an email template you can use to reach out to referred candidates.
3. Motivate and reward employees
By setting up an employee referral program, you gain new hiring buddies: your coworkers. But it’s not that simple; it’s still your job to find good candidates, not theirs. They have their own tasks and projects, so it’s not always on their mind to refer potential good fits. This is where you may need to incentivize the process.
An employee referral bonus program can go a long way in motivating your coworkers. When they feel that there’s something in it for them, they’re more likely to think about and recommend people from their network who’d qualify for your open roles. Make sure that all employees are familiar with the terms related to the employee referral bonus. You can send an employee referral program announcement email to explain how the bonus works and include more details in an employee referral policy. Be clear about what constitutes a successful employee referral and when an employee becomes eligible for a referral bonus (e.g. employees get a bonus for every referred candidate who is hired, or for every referred candidate who stays with the company for a minimum of six months).
Employee referral bonus amounts don’t need to be over the top. Simple and inexpensive incentives such as event tickets, gift cards or extra days off can easily motivate employees. Looking for more inspiration? We gathered some employee referral program examples and bonus ideas that you can use to motivate your coworkers and reward them for their quality referrals.
4. Track employee referrals
Finally, to evaluate the success – or failure – of your employee referral program, you need to track and analyze some HR metrics. These could include:
- Number of total referrals vs. number of hired referrals: In other words, how many of the referred candidates were hired (or reached the final hiring stage, or another “successful” milestone)? This metric will show you whether your employees recommend people who are indeed suitable for your open roles. If your coworkers more often than not recommend candidates who don’t qualify, you might need to explain your requirements more clearly or reassess employees’ motivations in making these referrals in the first place.
- Number of referrals per role/department: If, for a certain role, you usually get good candidates through referrals, that’s valuable information you want to retain for next time you open that role. You can save time and money by asking directly for referrals instead of advertising the position on job boards or using other sources. On the other hand, if employees from a department hesitate to refer their friends, that might shed light onto a deeper issue. Perhaps these team members are not happy with their work, management and/or office culture and are reluctant to invite others to join.
- Turnover and retention rates for referred candidates vs. rest of employees. It’s a well-known statistic that referred candidates stay longer, but is this true at your company? And if it is, does this apply to all departments or only in specific positions and seniority levels? Answering these will help you determine whether referrals are a good option and, even, build the case for investing in employee referral software or increasing your employee referral bonuses.
Now that we’ve covered the basics, you can dig into our additional guides on how to build your first employee referral program or how to revamp your existing referral process. You can also explore these four employee referral program ideas that you can try out at your company.
The disadvantages of employee referrals – and how you can tackle them
So far, we’ve described the employee referrals advantages. Now, it’s time to examine when and why referrals might not be your best recruiting option.
Lack of diversity
Employees usually refer candidates like themselves: people they attended the same school with, people with a similar background, people they like to hang out with, and so on. This can create homogenous teams at the expense of diversity and inclusion.
To avoid nepotism and to bring more diversity to your teams, you should always use referrals as one of several candidate sources, not as your only or even primary candidate source. You could also encourage your colleagues to refer qualified people even if they don’t personally know them. For example, they could recommend a good speaker they saw at a conference or someone whose work they follow – and appreciate – on a professional site.
Lack of transparency
Picture this: Betty refers Arthur for a job at her company. She thinks that he’s a good fit and Arthur also seems excited about this job opportunity. Weeks pass by, and nobody from the hiring team contacts Arthur. Finally, after asking around, Betty finds out that they hired someone else for the role. Betty now feels bad for building up Arthur’s expectations and she’ll probably won’t refer anyone else in the future.
It doesn’t mean that referred candidates like Arthur are automatically qualified for the job. But they’re still candidates and deserve to know whether they’re being rejected or considered for the role. And employees who made a referral should be confident that the hiring team evaluated the candidate properly. Having a referral system in place will help you keep the process organized and ensure your communication with candidates and employees is prompt.
How to use employee referrals with IWA
Whether you want to test how effective referrals are or invest in a robust employee referral system, you can find the solution that best suits your needs inside IWA.
If you’re only occasionally asking for referrals (e.g. for hard-to-fill positions), you can use an editable email template to inform your employees about your open role and requirements. This email, that can be sent to all staff, will direct employees to the page where they can quickly add the details of the person they want to refer.
If you regularly rely on quality referrals from your coworkers, you might find more useful a system dedicated to organizing your referral process. That’s why we built IWA Referrals: an advanced referral and internal job portal, where recruiters and hiring managers share their job openings, set up reward systems and track referrals, while employees see the progress of their active referrals, track their rewards and, even, apply for an internal job.
Want to learn more about how you can manage referrals through IWA? Read our detailed guides on how to set up an employee referral program step-by-step and how you can keep track of employee referrals.