How to Craft a Robust Employee Referral Program that Works Every Time?

Employee Engagement
10 MIN READ
December 8, 2020
Syed Maaz

One of the riskiest points on an organization’s list of action items is the responsibility to hire the right (wo)man for the right job. No matter how streamlined or organized the process becomes, it all boils down to how good the prospect is for the task at hand. But apart from the HR taking the interview, who’d know what your organization expects from its employees? The employees working with you!

This is where employee referrals come into the picture. A detailed sketch, job description, or even an expectations list can’t explain what the organization wants from the prospects like an existing employee can to his friend/acquaintance. But why do most employee referral programs either fail to bring out the prospects or result in shambolic hiring sprees that escalate turnover? Let’s start with why employee referral programs are a need of the hour.

Why is the Importance of Employee Referral Programs?

Employee Referral Programs Rewards

What starts with “So what my company does is…” and ends with “…and this is what you’ll have to do if you are in” filters out just the right candidate—making employee referral one of the most successful modes of recruitment.

Employee Referral Programs Rewards Statistics

A study revealed the difference between traditional hiring and employee referrals, and boy it’s a surprise.

Not only that, but it is also backed up by research that referred candidates are of higher stature and quality than hiring from a pool of candidates that say, leave a resume on your website, or line up for walk-ins. They receive and accept the offers with open arms, stay at the job for a formidable tenure, and have a good performance curve.

As if the above pointers weren’t enough to highlight why referral programs are crucial for the employer, the employees have a good motivation to do it too.

Employees refer their friends and/or well-wishers to the company because:

  • They are helping a friend find work in a position that deems suitable
  • They are helping out the organization escape the cumbersome process of hiring from scratch
  • They want to cop those employee referral rewards (more of that later)
  • Who doesn’t want to work with their friends?!
Employee-referred candidates makeup just 6.9% of total candidates but account for 40% of total hires. - Jobvite

Let’s have a look at a theoretical proof, followed by an enterprise platform’s example on how they made the most of employee referral program rewards to get the cream crowd.

Employee Referrals bolster the Motivation Levels

Employee Referral Programs Rewards

To back it up with theoretical proof, McClelland’s Theory of Motivation speaks volumes about an employee’s need for power, achievement, and affiliation within and outside the organization. With respect to the employee referral program, you, the employer, equip the employee’s arsenal with all three intangible superpowers:

  • The feeling of power with the ability to influence the hiring decisions of the organization by recommending the right candidate(s)
  • Sense of Achievement through the employee referral awards which are a major selling point for employees to refer people in the first place
  • Affiliation towards the organization as the referrer acts as the brand ambassador to your organization while talking about it to their peers

Referrals bring jobs to the attention of people who aren’t actively looking, getting your company a fresh pair of eyes.

Talking about hitting two birds with one stone, you get a terrific new hire (if it all goes right) and the referring employee walks back home happy that s/he will see their friend at work in the near future.

Advantages of Employee Referral Programs

Just the motivation of keeping the concerned employee in the loop won’t motivate employees enough. Hence, employee referral programs come with a rewarding structure so as to give the employees an extra kick. Here are the major benefits of  employee referral programs:

1. Reduced Recruitment Costs

With the recruitment costs cut by quite a margin, the organization saves a considerable amount of financial resources. The right person literally walks up to the interview room holding the referring employee’s hand and a part of those saved costs can be reinvested in rewarding the referrer(s).

2. Referrals take Less Time

Employee referrals save time along with money. In fact, research from Glassdoor suggests that it takes an average of 23 days to hire a new employee in the United States and this would only increase. Employee referrals, however, reduce the time span; making the rewards an investment that payback in time saved.

Employee Referral Programs Rewards Statistics by Glassdoor
Source: Glassdoor

3. Referral Rewards ensure the Quality Factor

When it comes to the quality of referred candidates, the rewards at stake are generally pretty high i.e., a percentage of the referrer’s salary. This gives the referrer an added motivation to put the best cards forward while referring to their friends or old colleagues.

Organizations are moving over Cash-based Employee Referral Bonuses

Sure, nothing’s better than cold liquid cash to slurp on, but employees of the new age are more enticed by referral bonuses that offer experiences and vouchers over cash.

For instance, InMobi, a marketing cloud company started giving out Royal Enfield (often referred to as the Indian Harley Davidson) and Vespa scooters to their employees for every referral they made. What was the deal? They stopped giving out cash bonuses on employee referrals and shifted it to experiences.

Another plus point to this approach is that they appear more luscious in the eyes of the referrer. A chance to win a freeway motorbike sounds music to my ears rather than a bonus amount in cash as it’s very tangible. And as always, organizations can make it a choice between cash and non-cash bonuses for employees to get on referring someone.

Automated Employee Referral Programs are the Future

As the employee referral process is streamlined and follows a procedure, various recruitment and hiring platforms have integrated with rewards and recognition tools to automate it. The employee referral procedures of today are splintered with referrals getting lost in mail trails and HR sieving out formidable candidates out of immense workload.

Even if the referrals make it up the recruitment pipeline, the referrer isn’t informed of their valuable contribution which defeats the purpose of a referral reward. This problem can be solved thanks to automation.

Platforms like Xoxoday Plum make employee referrals automation seamless by integrating with recruitment and hiring platforms that work by setting up rule engines. These rule engines can trigger referral rewards on specified conditions and on integration with your applicant tracking system, it can be totally automated. To top it all off, a platform like Xoxoday Plum has countless experiences, gift vouchers, and deals for the referrers to choose from.

Not only would you not lose any referral in the pipeline, but every referrer will get their due share without fail—which would make the employee referral program a hit.

Automate Employee Referral Rewarding process with Xoxoday Plum and keep your workforce on fleek with the best people. Learn more>>

How to Set up the Perfect Employee Referral Program?

how to set up Employee Referral Program

The essence of an employee referral program lies in the clarity of communication. All the HR has to do is communicate it to the employees and they do all the hard work (till the interviews start coming in). The employee referral program has to be clear on these fronts:

  • Why does the program exist?
  • What positions are open?
  • What’s the catch? State the perks that employees get on successful referral(s)
  • Rules and T&C of the program
  • Deadline on submission of referral(s)
Social media platforms that companies use to hire: SHRM
Social media platforms that companies use to hire: SHRM

Once these things are communicated, the employees will start flashing their cards in no time. Do note that the employees should understand the role in question and in case there’s a gap in prospects coming in and the prospects that the HR wanted, it should be clarified again.

What to do after the Referrals come in?

Employee Referral Programs Rewards

It’s safe to say that the quality of referrals matters more than the number of applicants sent HR’s way. Either way, the three things that HR should do after the referral campaign is in full swing are:

1. Appreciate

For the employees that contributed, appreciation is crucial to value their input and motivate others to put their foot forward. You don’t want to leave the employees thinking that their referral went as just another unread email.

2. Communicate

Give out a straightforward progress record—be it in a candid breakroom chat or on email. Most employees are eager to know their referral’s progress as they are worried if their referral was able enough to be shortlisted or not.

3. Reward and Reward well

In case of referrals that hit the bull’s eye and got indicted into the roster, the referrer should be well rewarded. Keep the referral bonus straightforward and your employees will already have an incentive to refer top candidates to human resources. Don’t include more if’s or but’s than what’s needed.

The Crux: Refer, Recruit, Rinse & Repeat

Employee referrals are one of the most prominent and cost-effective methods of hiring. If the employee referral program is set right by keeping in mind the stuff given above, it’ll reap the perfect pool of candidates without exhausting time, money, and efforts. And yes, don’t forget to reward your referrers for bringing their friends in!

Guide To Action For Empuls Engagement Survey: Employee Recognition And Career Growth
Originally published on
December 8, 2020
Updated on
December 28, 2020
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