Employee Referral

All you Need to Know about the Employee Referral Program

As it becomes harder to find skilled workers, a lot of companies are resorting to employee referral programs as a strategy for recruitment. However, if you have questions like; what is an employee referral program, and how can it benefit employees and employers? We’ve come up with some answers to help you understand the employee referral program better.

What is an employee referral program?

These are formal and structured programs that employers implement to encourage their existing employees to refer and recommend top-quality candidates for open positions in the company. These programs are highly effective recruitment strategies as research has shown that referred employees usually have the lowest turnover rates. Answering the question what is an employee referral program isn’t complete without taking a look at the two types of employee referral programs and their benefits;

  • Candidate recommendations: this is the most common type of employee referral program. Employees can usually tell if someone would be a good fit for your company so, they basically help you filter out and pick the best candidates. Studies have also shown that referred applicants are usually able to start work earlier than those who are hired through job boards or career sites. Thus, cutting recruitment costs and time.
  • Brand advocacy for new customers: in this case, existing employees use their knowledge and expertise to recommend your products and services to other people. They are basically acting as brand ambassadors to bring in high-quality customers to your company. This helps to cut the costs of marketing campaigns and helps you foster a good relationship with customers who are more likely to stay loyal to your brand,

Other merits of employee referral programs include;

Better cultural fits – referred candidates usually have a pre-conceived idea of what your company culture is like and choose to be a part of it. They are joining a workplace where they already know what to expect and are already familiar with at least one person. This can improve retention rates with both new candidates and the existing employees that made the successful referrals.

Candidates for hard-to-fill roles are easier to find- Employee referrals come in handy when looking for hard-to-find skills, especially in an intensely competitive space such as the tech scene. Having your employees act as part of your recruitment team can make things easier since they can help you identify potential candidates within their own network.

How to design and manage an effective employee referral program

To set up and benefit from an employee referral program, one must first understand; what is an employee referral program (which we have discussed above), why you need an employee referral program, and how you can benefit from it. Below is a step-by-step guide you can follow to design an employee referral program

Define the goals of your program

Some of the goals you might want to achieve with an employee referral program include; improving quality of hire, improving retention rates, better cultural fits, lowering recruiting costs, increasing diversity, and sourcing for candidates with a specific set of skills. With these goals in mind, you can begin to decide why and when you choose to ask for referrals during a recruitment process.

Set up the infrastructure

An employee referral program is only effective when employees are engaged in the process. Ensure that you communicate with your employees so that they know; what is an employee referral program, how they can refer someone, what the role requirements are and how to submit a referral easily and quickly.

Define the terms and conditions for participating in your employee referral program

Your employee referral program should have clear and well-defined terms and conditions concerning who can take part in the program. Most programs usually exclude HR managers, temporary or contract employees, and top executives such as vice presidents and above.

Add incentives and rewards

Adding an incentive for each successful referral can go a long way towards motivating your employees to take the program more seriously and recommend highly qualified candidates. Ensure that all employees understand the terms and conditions related to these incentives. Incentives may be in the form of cash, extra paid vacation days, gift cards, gadgets, or tickets to shows or events.

Keep employees updated on the status of their referrals

Try to give regular updates to employees who refer candidates as this will encourage them to participate in the future. Letting them in on what’s happening at every stage of the hiring process will make them feel engaged and important.

Track employee referrals

Track and analyze HR metrics like; the number of referrals per role/department, the number of total referrals vs hired referrals, and turnover & retention rates of referred candidates vs rest of employees. This way, you can evaluate the success or failure of your employee referral program and make proper adjustments.


Just like every other recruitment strategy, employee referral programs involve a lot of testing and tweaking to see what works best. It may take a little time to set up a successful program but once you find the formula, you will be able to cut a lot of costs on your recruitment process and hire valuable candidates with good retention rates.

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shil paj