An employee referral program is a process through which employees recommend qualified people from their network for possible recruitment.

Organizations that have effective referral programs can reach over 50% of all hires from referrals. Referrals are an important feature of any recruitment program.

Potential benefits of an employee referral program

An employee referral program (ERP) helps an organization to:

  • Attract top talent
  • Reduce costs
  • Create a positive culture

Advantages of employee referral programs in recruiting

Having a well-implemented and successful ERP can be a competitive advantage for your organization. Within your business, employee referral programs also offer advantages:

  • Employees who are hired through referrals tend to stay with the company longer than other candidates
  • ERPs open the door to inactive job seekers who may join your startup with encouragement of a friend or a trusted networking contact
  • ERPs are a quick, low-cost and high-quality way of finding candidates

Potential pitfalls

A common obstacle with employee referral programs is that employees are not interested in the program. Focus on simplicity and communication.

Some employees may hesitate to make a recommendation in case it does not result in a successful hire.

Make it clear that each candidate will go through the regular human resources recruitment process, so that both the candidate and the organization can assess the fit.

Motivating your team to participate in the employee referral program

Make your program easy to use so that employees will readily participate. Make sure you:

  • Promote and publicize successful employee referrals, and keep the interest up with prizes or incentives
  • Identify the incentives on offer. You could award a standard prize each time, or vary the reward depending on the difficulty of filling a position
  • Inform employees when positions open up and have job descriptions easily available
  • Implement communication and training programs to acquaint your team with the rules and policies surrounding recruitment
  • Track referral sources for future use (especially for strategic and difficult hires)
  • Provide the reward immediately after the probation period
  • Provide feedback during and after the employee referral process

It may take some trial and error to get your employees involved in the ERP process. Selling and continually improving your organization’s culture can also play a role.

Choosing incentives for your employee referral program

The types of incentives you offer can also be important when engaging your workforce. Proven methods include:

  • Public recognition
  • Financial rewards
  • Vacation days
  • Other rewards, such as trips
  • Ability to provide input about the process

Designing your employee referral program

If your tech startup is putting together an employee referral program and you are seeking guidance on its design and implementation, consider the following:

  • Survey employees who have referred candidates in other organizations
  • Survey non-referring employees and ask them about barriers to participating. Provide a theoretical list of rewards and motivators and ask them to highlight the ones that would most likely spur their participation
  • See what other organizations are doing
  • Try out different programs since incentives can lose effectiveness over time