What is an Employee Referral?

Employee referrals are often thought to be the golden opportunity for job seekers. While it cannot guarantee you the job they are vying for, it can increase the odds that their application will be successful, as Zippia found candidates with referrals are 4x more likely to be offered a job that an applicant who applied through the company careers website.

An employee referral is at its core an endorsement from a pre-existing employee of a job applicant’s abilities and talents which would make them a great fit for recruitment into a vacant position. This is because the employee and applicant know each other, whether through working together in the past, going to school together, being in the same network and having mutual connections – the list goes on.

A referral can be informal, where the employee would simply share the applicant’s name and contact details with the recruitment team and letting them know they think this person would be a good fit. An employee referral can also be part of a formal program. This is where the employer offers an incentive or reward, such as a bonus or extra holiday days, for employees who refer a candidate who is successful in getting the job.


Why set up an employee referral program?

An employee referral program is the best way to leverage employee referrals for hiring. As competition for hiring top talent only increases, leveraging internal networks and utilising employee referrals has become a method which brings results, allowing your recruitment team to hire top talent and increasing the employee satisfaction of the individual who introduced you to the referral due to the reward offered for a successful hire.

Streamlined Efficiency

Zippia found that referred candidates are 2.6-6.6% more likely to accept job offers. This may be because they already know someone in the company, so feel more confident in their knowledge of the culture and people there. It may also be because your ideal candidate may not have been job seeking in the first place and it was only because their connection made them aware of this opportunity that they decided to leave their former role. This means they were not attending multiple interviews and receiving multiple job offers from different companies.

Effective for Employee Retention

Everyone knows how costly it can be to have a high rate of employee turnover, and it looks like hiring through employee referrals can help you out there. Research found 45% of referral hires stay longer than 4 years, compared to 25% of job board hires. This also indicates that they likely have higher rates of employee satisfaction as well – otherwise they wouldn’t stick around!

It can also aid in your retention of the employee who found you the referral. This could be a mixture of their referral bonus, feeling as if they’ve contributed something meaningful to the workplace, and possibly even working with a friend of theirs. All of these factors will give a boost to their satisfaction and happiness at work.

Strengthen Employer Brand

Having a pre-existing employee personally endorse your company as a good place for the referral candidate to work at can aid your recruitment efforts and be a major boost to your employer branding. This is especially true if your new hire is well thought of in your industry, as if they share their new position and company on social media, or even just verbally with their network, word is bound to get around.

This may lead to other highly qualified talent being interested in your company, so building out your pipeline and network with these individuals for you to possibly recruit in the future could save you time and money.


How to make the most of Employee Referrals

Be clear on what you’re looking for

Having a detailed description of the role’s responsibilities, benefits, salary, and growth opportunities is vital before you pursue and recruit any potential new hires. It can reflect poorly on your company, hiring team and the employee that supplied the referral if you get half way through a process and realise that the referral is not actually the right fit. Setting expectations and a clear job description from the get go is the best way to avoid these issues. This also extends to what the referral candidate hears about your company culture.

Despite the incentive of a reward, like a referral bonus, for successfully brining on their connection, the employee who referred them as well as your recruitment team should be honest about any aspects of company culture which may not be compatible with what the referral applicant is looking for.

Be considerate of DE&I

Be aware that some of your people will not have the most diverse networks. Chances are if all of your current senior leaders are white men then their networks likely look similar, so if you are hiring for a vacancy on this level it’s likely worth exploring the networks of the more diverse teams in your company. Though they may have less connections who are qualified for this position that doesn’t mean they don’t know anyone with potential, or friends of friends! If this method fails then hiring through referral may not serve your best overall interests this time around, and it may be time to turn to social media and job boards for your hiring needs.

Re-evaluate the rewards you offer

The incentive you are offering your employees to refer talent in their network will help sway the tides. If it is someone that the employee is close to or friends with, this may be their main motivation for wanting to onboard them into the same company as them and they’ll happily get involved in your employee referral program.

However, if it is simply someone they know in a professional capacity, or through mutual connection, the idea of putting in all that effort with no incentive, or even possibly approaching someone they have not spoken to in a while needs a little motivation behind it to compensate for their work and any awkward conversations!

Know that there will still be work involved

Just because you’ve found a suitable candidate through referral that doesn’t necessarily mean it will be an effortless hire. Chances are their currently with a different employer, so you’ll have make sure your offer is attractive enough and offers enough incentive to convince them to move. This is especially true for if they were content in their current position. Referred candidates can also often be passive candidates, so you’ll have to put in the time to nurture the relationship.

You might be interested to learn more about how to engage passive candidates.


So, is it worth it?

The initial set up and deployment of an employee referral program does require thought and effort, but the benefits of it for both the employee and employees are clear. As long as you are considerate of DE&I and set clear objectives for your recruitment team it’s almost impossible not to reap the rewards of employee referrals.

If you enjoyed reading this blog, you might be interested to learn more about Five Things You Can Include In Your employee Onboarding Pack for any new employees you hire through your employee referral program.

About the author

Hannah Elliott