Best Employee Referral Program Complete Guide 2020

author Written by Jinisha Ghodasara July 30, 2019

quick guide to build

The employee referral program has become one of the most popular hiring strategies in recent times. It is similar to a friend recommending you a movie or television series to watch over the weekend, but in this case, it's a candidate being referred for a job position in your company. It is important to have a well-structured employee referral program to get the most productive outcomes.


What is the Employee Referral Program?

The employee referral program is a program where new employees are hired based on referrals by a candidate from the organization. A good referral program gets the best employee for the job and makes the existing employee feel valued.

What are the Pros of the employee referral program?

- Improving the quality of hire

The employee referral program is considered an internal method for finding job candidates. Your existing employees know what qualities your company needs in their employee so the employee referrals most of the time make a much better match than candidates coming from other sources.

- Improves employee retention

It is a known fact those employees who match organizational culture, norms and values better will also stay longer with the company. The candidates who come through referrals know what the company needs out of them and also how the company operates. This makes them feel right at home from the very beginning.

- Saves time

This program saves times for the employers as to learn about the company from your current employees, are familiar with the hiring process and on-boarding. Also, contacting them is easier. This speeds up the hiring process.

- Saves money

If you opt for referrals from your employees, you can eliminate some other costly sources such as job boards, paid advertisements etc..

- Improves Employer Brand

Usually, before applying for a job position, people tend to seek an employee's opinion to gain true knowledge about the company and so when you implement an employee referral program, your employees automatically build brand image in the market.

What is the Cons employee referral program?

- Discrimination Charges

If a company excessively uses an employee referral program, it could lead to discrimination charges from rejected candidates in the long run. So, the company should strike the right balance between referrals and other sources.

- Lack of ideas

The employee referral program might lead the new employee to stick along with the existing employee and this may lead to a lack of independent, or innovative ideas.


The disillusionment of the referral program

Strict guidelines for the bonus out for the referrals may lead the employees into disillusioned about the whole process which, in turn, can lead to the discontent of the employees.


Getting alienated from other staff

When you are hiring someone through reference, they are likely to hang-in together, thus raising the risk of getting alienated from other team members.


How to set up an employee referral program?

The following are the steps to implement the employee referral program for your enterprise.


The very first step to setting up an employee referral program is to thoroughly plan. You must understand your hiring needs like what positions you need to fill, what is the needed candidate persona, etc. Also, set goals like in what duration you want to hire new employees to improve the quality of job applicants, etc. Allocate all the resources and designate different positions for setting up the program.


After planning, automate the process by using modern and specialized HR tools like an application tracking system, email templates. Also, make sure to set rules and decide rewards prior to launching the program.


Launch the employee referral program and promote it through promotion campings and referrals parties.


Once the program is launched, it is important to maintain it in a proper manner. The employees should be appreciated and every time a new idea should be brought on board to keep it fresh. Also, it is important to evaluate the results and improve tactics to get the best out of the employee referral program.

How to make a referral program effective?

By now we have clearly established how useful employee referral program, but it does not give desired outcomes if it is not effective. This problem can be solved by keeping the following pointers in mind.

  • Keep employees updated about new vacancies

  • Acknowledge good referrals

  • Offer good monetary, as well as non-monetary incentives

  • Enhance user experience

  • Experiment with referral tactics

Examples of the successful employee referral program

Some of the most successful employee referral programs have been Fiverr's gamification method where they add a competition among the employees by offering points for sharing jobs and referrals like a game leaderboard.

Another great program was by none other than google where they simply ask questions to their employees like who is the best designer or coder they know!

Intel took a step up in the game by getting referrals and bringing diversity in the company at the same time. They offered a double bonus for the successful employment of women or minorities by referrals.

Digital Ocean structured its a program where they awarded the referring an employee with $3,500 and made a charitable donation of $1,500 on the employee's behalf. In this manner, they made the employee feel valued and contributed to a good cause.

Hewlett Packard kept it simple and effective by giving recognition to the employees for their efforts and celebrating them publicly.

Another honourable mention is Distillery. They personalised the employee referral bonus as per the employee's likings. So, if an employee has a hobby of collecting action figures and they want a particular one, they get it as a reward.


Why Employee Referral Rewards are important?

Employee referral rewards and bonuses are important for a successful employee referral program. Often, there are employees that refer better than others, and their work should be rewarded.

Best Employee Referral Reward Ideas

Everybody loves being rewarded. Some of the ideas for referral rewards are:

  • Give days off as a reward

  • Give bonus

  • Give a small gift even if the referred person doesn't get hired

  • Sponsor lunch for the new hire and the referrer

  • Fund cause of the employees' choice

  • Plan a holiday

  • Gift Vouchers

  • Corporate gift basket

  • Create personalized stationery

  • Gift for their pets

  • Certificate of appreciation

  • Recognition on social media

  • Handwritten note


What could be potential challenges when you execute an Employee Referral Program?

When you plan an employee referral program, there are somethings that can lead to its failure. To avoid this, we bring you some potential challenges that you may need to overcome.

  • Employees are not well informed about the employee referral program

  • Employees are unable to track the referrals

  • Employees face difficulty while submitting referrals

  • Once the referrals are submitted, they don't hear about it from the company

  • The process is long and tedious so employees prefer not to refer it

  • The rewards are not exciting enough

  • Lack of motivation to refer candidates

Important Statistics related to the employee referral program

No business decision should be taken without analysing its statistics so here are some figures about the employee referral program.

  • The employee referral program has 82% return on investment (ROI).

  • It can save companies $3000 or more per hire.

  • It completes the hiring process approximately 55

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