The Power of Employee Referral Programs in Hiring

The Power of Employee Referral Programs in Hiring


Employee referral programs, also sometimes known as employee referral bonus programs, are hiring mechanisms that encourage employee participation. They do this by creating incentives for existing employees to look for suitable applicants for positions within a company. It’s a recruitment strategy that’s intended to create benefits for both the company and its employees. 

What is an Employee Referral Program?

Employee referrals are considered by many to be an effective and productive recruitment strategy. Within an employee referral program, an existing employee recommends a candidate and thereby endorses their suitability for the position as well as fit within the company.

An employee referral program is a formalised and structured internally driven recruitment program. The underlying intention is to recruit talent that other recruitment methods wouldn’t have reached. This is accomplished by leveraging the networking skills that current employees have.

At its essence, these programs turn each employee into a company recruiter. They rely on existing employees to identify potential candidates and then approach and encourage them to apply for a job. As a recruitment strategy, these programs can be a goldmine for those looking to improve their Human Resource processes. This is because they can result in reaching better candidates at a lower hiring cost. Furthermore, when someone is employed through a referral program they often stay longer at a company and therefore the overall staff turnover is reduced. However, they can be time-consuming, admin intensive and instituting viable rewards programs can be complicated.

What is the Purpose of an Employee Referral Program?

A referral program for employees needs to have defined strategic goals. Therefore, some of their underlying purposes may vary from company to company. However, the overarching goal is the same – to recruit high-calibre talent that other recruitment methods might not reach. 

Over the last while recruiters have faced a shifting and challenging economic climate. The result has been that the expectations of employees have changed. For example, many now look for jobs that are more flexible allowing them to work from home or according to a hybrid model. It also means that traditional recruitment approaches need to be augmented through the inclusion of alternative recruitment strategies. Within a highly competitive landscape, a successful employee referral program has the potential to yield many advantages for a company.

5 Employee Referral Program Benefits

  1. Improved quality of job candidates.
  2. Decreased recruitment costs.
  3. Better company culture fit of new hires.
  4. Increased employee retention.
  5. Improved staff morale.

How to Keep an Employee Referral Program Fair

While they provide many advantages, the drawbacks of an employee referral program needs to be managed. One of the biggest potential challenges can be ensuring the diversity of candidates recruited. This is because often employee’s personal networks are within their immediate community which can limit the diversity of their recruitment. However, challenges can be managed with the correct checks and balances in place to ensure recruitment diversification and fairness. It is therefore often helpful to have an external perspective and/or oversight when running an employee referral program. Consequently, a recruitment agent who runs a successful Recruitment and/or Employer of Record Service (EOR) is often a good partner to have. 

5 Strategies to Ensure Recruitment Fairness

  1. Use a range of recruitment methods.
  2. Open referral programs to all employees.
  3. Use consistent evaluation criteria for job candidates.
  4. Regularly assess the success and effectiveness of recruitment methods.
  5. Analyse the workforce to see if diversity and skill quality are being improved and/or maintained.

Thus, like any recruitment strategy a referral program for employees needs to be managed in order to maximise its accomplishments. It is therefore often more helpful to work alongside a reputable recruitment company to ensure that both traditional and non-traditional recruitment strategies are successful.

How to Design an Employee Referral Program

One of the most important things to remember when designing an employee referral program is to keep it simple. The more complex it is, the less likely its success. Therefore, how it works needs to be quickly and easily understood. Accordingly, if a program requires long workshops to unpack, it’s already too complicated. Additionally, there should be as few restrictions as possible. Having too many could lead to questions of fairness and will decrease enthusiasm to participate in it. 

When designing an employee referral program, aim for well-defined goals and outcomes. Rules should be succinct and participatory processes transparent. Some companies fast-track referred candidates, although they are still evaluated by the same criteria as other candidates. It is good practice to accept all referrals even when there is no vacancy. This enables a company to build up a candidate repository which can be drawn upon when a position becomes available.

In order to better ensure a program’s success, communication with the candidate and employee needs to be timely and open. If possible, it is also helpful to provide the referring employee with feedback. This can assist in improving the likelihood of a staff member sourcing a suitable candidate.


Rewards that are built into the program need to be  appealing to current staff members. It is therefore advisable to include staff when choosing rewards and to regularly review what rewards are included. Rewards can be monetary or non-monetary. For example, a bonus payment, an extra day of paid leave, hampers, or gift cards. Often the more immediate the reward, the more gratifying and incentivising it is. Rewards can be based on providing a good lead or when a specific milestone is reached. For example, when a recruited candidate signs a job contract or reaches 90 days of employment.

Partnering for Recruitment Success

As employee referral programs have many nuances, and can therefore be complicated, outsourcing the program could enable a company to reap its benefits more easily. Recruitment agencies, like Key Recruitment, have a long successful history of assisting in the recruitment of employees through their direct placement and EOR services. Key Recruitment’s EOR services have yielded many benefits to companies and candidates. They continually show that partnering with Key Recruitment enables companies to reap the benefits of an external partner to source talent and mitigate many recruitment challenges. Furthermore, Key Recruitment will oversee a company’s employee referral program. Thereby running it alongside traditional recruitment methods, which better ensures that the best candidates are presented for vacancies. Contact Key Recruitment to enhance your recruitment strategy.