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Employee referral program

What is an Employee referral program?


An employee referral program is an organised and structured hiring program where employers ask existing employees to recommend candidates for open positions. Unlike sourcing, the employee referral program is an internal method used to find and hire the best talent from the employees’ existing networks. 

Employee referral program


How to set up an employee referral program


The method of setting up an effective employe referral program is to design a process that is easy for employees to use and set-up a rewards programs that encourages employee participation. The process mustn’t be riddled with too many restriction on who can refer candidates, or be oppressive with paperwork which may put a damper on employee participation and the referral program’s success. In order to set up a successful employee referral program, HR professionals may want to take the following steps:


1. Decide the essential objectives and expected results of the employee referral program

2. Plan the process and rules of participation

3. Devise a reward plan that will encourage employees to participate in the program

4. Build in features to maximise referrals


Advantages of an employee referral program


Finding talent is one of the biggest recruiting challenges, and in the era of modern recruiting, employee referral programs are one of the main and best sources for finding high-quality job candidates. The design this program is backed by the thought that current employees are uniquely qualified to identify the best candidate since they are well-acquainted with the organisation’s mission and company culture


1. Improves the quality of hire


Referrals are an internal method of fining job candidates, which means means existing employees can refer a candidate for the open position. Existing employees know best who the ideal candidate persona is. That is why employee referrals improves the quality of hires much better than candidates coming from other sources. 


2. Reduces turnover rate and improves employee retention


Referred employees often stay longer with companies. Because they make a better match to the organisational culture, norms and values from the beginning, they remain longer. This has huge impact on the employee turnover rate - one of the most important HR metrics. In addition, employees who have successfully referred candidates for open positions often stay longer with the company than employees that haven’t. 


3. Reduces time and cost per hire


In employee referral programs, recruiters can get a hold of candidate profiles and contact information pretty quickly, leading them to also hire and onboard much faster. The fast selection and hiring process gas a major influence on the candidate experience and is one of the most important metrics in talent acquisition. 

The fall in time to hire results in the fall in cost to hire. Recruiters utilise less energy to fill a position, making the hiring strategy more efficient and productive. 


Disadvantages of an employee referral program


1. Recruiters may sometimes get recommendations based on a bias. If they are an employee’s friend or acquaintance, it could end up in the formation of cliques and could upset the team.

2. The organization could lack diversity and ideas. The business needs a variety of perspectives to nurture diversity of ideas. However, if everyone in the team is comprised of like-minded individuals, the business will lack in diversity in differences in opinions.

3. It would be undesirable to gain all new recruiters though employee referrals. Recruiters need to utilise other strategies which cost money and time, otherwise they will be missing out on other great candidates.