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Employee Referral Program Here 039 S Why It 039 S Important

Employee Referral Program – Here’s Why It’s Important

Thursday, September 29th, 2022

Employee Referral Program

An employee referral program (ERP) is a great way to tap into your company’s best talent. It boosts exposure to your open roles through trusted influencers, your employees.

By incentivizing employees to refer friends and colleagues, you can quickly identify top candidates already familiar with your company culture and values.

However, launching an effective ERP requires more than simply offering a monetary reward for successful referrals.

To ensure your program is successful, you’ll need to consider its design and implementation.

In this article, we’ll discuss everything you need to know about employee referral programs, from how to get started to what kinds of rewards to offer.

By the end of this article, you’ll be ready to launch your own ERP and attract top talent.

Let’s go! 🙂

What Is an Employee Referral Program?

An employee referral program is a system that allows employees to refer candidates for open positions at their company.

The program may offer incentives for employees who refer successful candidates, such as a bonus or extra vacation days.

Employee referral programs can be an effective way to find high-quality candidates, as referrals tend to have better job performance and stay with the company longer than other hires.

When designing an employee referral program, companies should consider what type of position they are looking to fill and what incentives will appeal to their employees.

The program should be simple to use and promote positive word-of-mouth about the company.

An effective employee referral program can help a company save time and money on recruiting while attracting top talent.

How to Promote Employee Referral Program?


Keep the Employee Referral Program Simple

There are many good reasons to keep your employee referral program simple.

Too often, companies try to complicate things with too many rules and requirements, which can discourage employees from participating.

Employee referral programs are successful when:

  • Simple Promotion. If your ERP is too complicated, it will be hard for employees to understand and get excited about it. A simple program is much easier to promote internally, which can help increase participation rates.
  • Simple Terms. The simpler the program, the easier it will be for HR and managers to administer. This can save a lot of time and headaches down the road.
  • Simple KPIs. A complex ERP is more likely to run into problems and be less successful overall. A simpler program is more likely to achieve its goals and be well-received by employees.
  • Built with flexibility. A simple program is easier to adjust as needed, which can be important as your company grows and changes.
  • Built for growth. A complex ERP can be difficult to scale up or down as needed, but a simpler program can be easily adapted to changing needs.

Offer Incentives

To make your employee referral program successful, you need to offer incentives that will encourage employees to participate.

Here are some of the reasons why offering incentives is essential:

It Motivates Employees to Participate

One of the most important reasons for offering incentives is that it motivates employees to participate in the program.

If employees are not motivated to participate, the program will likely fail.

By offering encouragement, you can ensure that employees are more likely to participate in the program and refer high-quality candidates.

It builds a Positive Relationship with Employees

Offering incentives also help to build a positive relationship with employees.

Doing so shows that you value their opinion and are willing to reward them for referring high-quality candidates.

This can help to create a more positive work environment and improve morale.

It Increases Employee Retention

Offering incentives can also help to increase employee retention.

This is because employees are likelier to stay with a company that values their opinion and rewards them for referring high-quality candidates.

Therefore, offering incentives is an effective way to keep employees happy and reduce turnover.

Boost the Program

Ensure employees are aware of the program and know how to participate. Promote the program through internal communications, posters, or emails.

And be sure to thank employees who refer candidates – publicly or privately.

There are numerous ways to promote your Employee Referral Program.

Check out the following ideas!

  • Make it visible. Put up posters or an email template for all employees. Create a dedicated page on your website that explains the program in detail and provides easy-to-follow instructions for employees. Digital signage can engage employees.
  • Train your managers. Ensure your managers know the program and how to use it.
  • Incentivize referrals. Offer a bonus or other incentive for employees who refer someone who is hired.
  • Make it easy. Make sure the process for referring someone is straightforward.
  • Publish success stories. You could use your company’s blog or website to show off the great candidates that have been hired through the program.

Evaluate the Results

It’s essential to evaluate the results of an employee referral program to ensure that it’s meeting its objectives and providing a positive return on investment.

By tracking key metrics, you can identify areas for improvement and make necessary changes to keep your program running smoothly.

Additionally, regular evaluations help you gauge the overall effectiveness of your employee referral program and determine whether it’s worth continuing or making changes to.

There are a few key metrics that you should track when evaluating your employee referral program.

These include:

  • Number of referrals
  • Number of hires
  • Time to hire
  • Cost per hire

By tracking these metrics, you can get a good idea of how well your program is performing and where there might be room for improvement.

Let’s get into more detail regarding the above metrics.

Number of Referrals

This is a good metric to track because it gives you an idea of how many employees are actually using the program.

If you see a decline in the number of referrals, it could indicate that something is wrong with the program or that employees are no longer interested in referring people.

Number of Hires

Tracking the number of hires will give you an idea of how successful your program is in finding qualified candidates.

If you’re not seeing a lot of hires, it could be an indication that the program needs to be tweaked or that employees are referring to unqualified candidates.

Time to Hire

Another metric that’s worth tracking is time to hire. This metric will tell you how long it takes for an employee referral to result in a hire.

If you’re seeing a long time to hire, it could be an indication that the program needs to be improved or that employees are referring candidates who are not a good fit for the position.

Cost Per Hire

Finally, this is a metric that can be very helpful in evaluating the results of your employee referral program.

This metric will tell you how much it costs to hire someone through the program.

If you’re seeing a high cost per hire, it could be an indication that the program is not as efficient as it could be or that employees are finding too many unqualified candidates.

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Benefits of an Employee Referral Program


Increased Quality of Hires

When employees refer candidates, they are more likely to be high-quality candidates.

Employees are more likely to refer people they know are qualified and would be a good fit for the position and company culture.

Faster Hiring Process

An employee referral program can help you fill open positions quickly. This is because referred candidates tend to move through the hiring process faster than candidates sourced through other channels.

Reduced Recruiting Costs

An ERP can also help you save on recruiting costs.

Referred candidates are less expensive to hire than candidates sourced through other channels.

Improved Employee Retention

Employees who refer friends and colleagues are likelier to stay with the company.

They feel invested in the company and are more likely to have a strong sense of loyalty.

Also, one study has shown that referrals stayed 38 months longer in the company than non-referrals.

Increased Employee Engagement

An employee referral program can also help to increase employee engagement. When employees refer candidates, they feel more connected to the company and are more engaged in their work.

Enhanced Company Brand

An employee referral program can also help to enhance your company’s brand. When employees refer candidates, they effectively endorse your company to their friends and colleagues.

This can help to create a positive association with your brand and improve your employer’s brand.

Benefits Of An Employee Referral Program


What About the Disadvantages of an Employee Referral Program?

Despite the many benefits of an employee referral program, a few disadvantages exist.

These include:

Limited Pool of Candidates

One of the biggest disadvantages of an employee referral program is that it can limit your pool of candidates.

This is because employees can only refer people they know, which means you may not be able to reach as many qualified candidates as you would with other recruiting methods.

Potential for Favoritism

Another downside of employee referrals is that they can lead to favoritism. This is because employees are likelier to refer people they know and like.

This means that those candidates may have an advantage over others who are equally qualified but less well-known to the referring employee.

May Not Reach Diverse Candidates

Another potential disadvantage of employee referrals is that they may not reach diverse candidates.

Employees are more likely to refer to people like them regarding race, gender, and other characteristics.

As a result, you may end up with a less diverse pool of candidates than you would with other recruiting methods.

Despite these disadvantages, employee referrals can be a valuable way to find qualified candidates.

If you’re considering implementing a referral program, carefully weigh the pros and cons to decide if it’s right for your business.

What is the best way to structure employee referral bonuses or incentives?

There’s no one-size-fits-all answer to this question – it depends on your company’s specific needs and goals.

However, a few things to remember when designing employee referral bonuses or incentives.

First, consider what you want to achieve with the program.

Once you know your goals, you can structure the program in a way that’s most likely to achieve them.

Second, think about what kind of incentives will be most motivating for your employees.

Cash bonuses are always popular, but you could also offer other rewards, such as extra vacation days, gift cards, or tickets to events.

Finally, make sure the program is easy to understand and administer.

Employees shouldn’t have to jump through hoops to receive their bonuses, and the process for claiming rewards should be clear.

Consider creating an internal Google Document which can have all the terms of the employee referral program.

Inside this document, be sure to include the terms and conditions of the bonus for the referrals.

Links to supporting documentation, promotional or marketing materials, and links to where the referrals apply. You’ll want to also include a link to a tracking tool to show the referrals and their status in the employment process.

This would create a very transparent and fair view to see referrals.


An employee referral program can bring many benefits for both employers and employees.

By providing employees with an incentive to refer high-quality candidates, employers can reduce their recruiting costs and improve their chances of hiring top talent.

Additionally, employees participating in referral programs are more likely to be satisfied with their jobs and less likely to leave the company.

Given these advantages, it makes sense for employers to implement an employee referral program in their organization.

Here at VIVAHR, we developed an Employee Referral Feature that invites team members to participate in the recruiting process.

Employees can share jobs and find new people to join the company.

Employers can keep track of position referrals and shares and give employees credit whenever someone applies through their shared link.

Having a well-designed employee referral program doesn’t need to be challenging.

Set a clear goal according to your company’s needs and lean on your greatest assets – your employees! 🙂

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