Employee Referrals - Recruiting on Steroids

Let's just get one thing straight... recruiting, in addition to being a hard job is also insanely expensive. From advertising your new job openings to filtering thousands of applications to conducting multiple interviews for a single candidate and onboarding new hires, each step of the job costs a lot of time and hence a lot of money.

If you my friend are looking for a way to reduce costs in recruiting for your company, let me introduce you to the concept of the employee referral program. Employee referrals are not just effective in cutting costs, they help with boosting employee morale, and they also lead to the company finding A-tier candidates.

What are Employee Referrals?

Employee referrals are when an existing employee of a company recommends someone they know who is qualified for a job opening, it can be a friend or family member for a job at their company.

Importance of Employee Referral Program

Implementing employee referral programs has become quite popular in the recruiting industry. Heck, it is so effective that there are even companies that hire only on the basis of employee referrals. Let's dive right into how it can help you with your recruitment process by looking at some data.

1. Increases Employee Morale

Employee referral programs have proven to improve employee engagement and morale. Through employee referrals, employees are much more involved and engaged with the recruitment process and it also makes them feel that their opinions are important and valued. This can result in an increase in motivation and productivity.

2. Better Employee Retention

A surprising byproduct of employee referrals is that it leads to a better employee retention rate. Who would have thought? right! A study done in 2016, titled "Employee Referrals and Employer Hiring Decisions: Evidence from the Federal Reserve Banks" found that the retention rate for referred employees was 15% higher as compared to employees who were recruited through other recruitment methods.

Read more about how you can increase employee retention.

3. Lesser Time-to-Hire

According to a study by Jobvite, the cost-per-hire for employees who were referred by other employees was a whopping 46% lower than for other recruitment methods. This means that it not only leads to a faster time to hire but also results in a significant reduction in recruiting costs.

How to implement Employee Referral Program?

1. First thing first, you need to get your management on board with your plan. Not only do you need their approval, but you also need to sit with them and craft a strategic plan. Do not forget to discuss the incentive plan when talking about employee referrals. This will lead to increased motivation from the employees' side to participate.
2. Next, you need to get the word out. Tell your employees about the employee referral program. Let them know what the incentives and benefits are. Make sure they understand how to participate in the program.
3. Make it easier for your employees to refer people. Give them clear instructions and design a  user-friendly system that the employees can use to submit their referrals.
4. In order to make better data-driven decisions constantly keep an eye on the results and effects of your employee referral program and strive to continually make improvements to the program for much better results in the future.

Conclusion

The employee referral program is a win-win for the company and your employees. It leads to finding better quality candidates at a much faster pace which saves your company money and also leads your employees to feel valued. As you implement the program into your process you'll begin to see the results almost immediately.

‍