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Employee Referral Program (ERP)

An employee referral program (ERP) can help you identify qualified candidates for open roles by leveraging the networks of your current employees.

Continue reading to learn what an employee referral program is, how your company can benefit from an ERP, how to create a program and to gain ideas from other companies’ employee referral programs.

What is an Employee Referral Program (ERP)?

An employee referral program (ERP) is an internal program where current employees can refer candidates to apply for open positions in your organization. Often, if the candidate they refer is hired, the employee is rewarded with a pay bonus or other incentives like extra vacation days, gift cards or recognition.

Benefits of Having an Employee Referral Program

An employee referral program can help you identify and attract qualified applicants for open positions. Implementing an ERP can benefit your organization in several ways, such as:

  • Expediting the hiring process. Candidates referred by existing employees can skip preliminary steps in the recruitment process, like resume screening, and get hired faster.
  • Reducing recruiting costs. Leveraging an employee referral program can save you money that you would spend on job board fees, prescreening and more.
  • Improving retention. Current employees are more likely to refer candidates who want to work for you and will remain at your company.
  • Increasing quality of new hires. Employees are only likely to recommend candidates they feel are highly qualified for the position and fit with the company culture.  
  • Faster onboarding. Because referred new hires already know someone at your organization, they typically onboard faster than new hires from other sources.
  • Boosting morale. When you ask existing employees for referrals, they feel like a valuable part of your organization by actively contributing to the company’s growth.

How to Create an Employee Referral Program

To maximize the efficiency and outcome of your employee referral program, there are several steps to consider. The following strategies can help you create an employee referral program at your company.

1. Devise a Strategy for Your Employee Referral Program

Before taking any action, you need to strategically plan your program based on your desired goals and anticipated outcomes.

Examples of goals might include improving the quality of hire, increasing new hire retention rate or improving morale within the organization. Anticipated outcomes could consist of lowering your recruiting costs, reducing your time-to-hire or simply deepening your pipeline of potential applicants.

It’s important that you develop specific metrics in this stage so you can measure the success of your program in the future.

2. Design a User-Friendly Program

You want to make it as easy as possible for your current employees to refer candidates for open roles. Creating clear, defined policies and practices helps everyone understand how the program works.

There are different types of technology and tools that can help you automate your employee referral program. Some applicant tracking software (ATS) systems come with capabilities to create an ERP, while other technology is designed specifically for employee referral programs.

3. Brainstorm Incentives for Existing Employees

One of the key components in getting employees to participate in your ERP is the incentives for successful referrals. While many programs offer employees bonus pay for referrals that are hired, there are other incentives to offer, such as:

  • Additional paid time off (PTO)
  • Gift cards
  • Other prizes
  • Recognition in company emails or meetings

You will want to determine when the employee receives their incentive to avoid any confusion when a successful referral is hired. It’s common to award the incentive upon the new hire onboarding, although you can wait until a certain amount of time to ensure the new hire successfully onboarded.

4. Communicate Your ERP to Existing Employees

Once you’ve designed your employee referral program and determined incentives, you have to let your employees know that it exists. When you first introduce the program, train current employees on the specific process, what to look for in a referral and what to expect when they refer someone.

Consider regularly promoting the program in company newsletters and staff meetings.

5. Recognize Employees Publicly for Successful Referrals

Along with promptly rewarding employees with their incentives, publicly recognizing a successful referral can encourage other employees to participate in the program.

You can recognize employees who successfully referred new hires in company emails, staff meetings and social media.

6. Measure Your Success

Using your predefined metrics, measure the success of your program on a consistent basis. Some examples of metrics include:

  • The number of employees hired from the program versus other recruiting methods
  • The number of qualified candidates referred versus other methods
  • Your workforce participation rate in the program
  • The retention rate of referred new hires versus new hires sourced through other recruiting methods

If you find that you aren’t achieving your goals, revamp your program and ask for feedback from current employees to help improve it.

Examples of Successful Employee Referral Programs

To increase participation in your employee referral program, try to make it unique and engaging for current employees. Here are a few examples of organizations that have created successful employee referral programs.

Salesforce

Salesforce hosts a happy hour where team members can invite friends who may be strong candidates for the organization. This allows potential referral candidates to interact with current employees and hiring managers face-to-face before ever submitting an application.

Google

Money isn’t always the best incentive to offer employees. Google discovered this when they raised their referral bonus from $2,000 to $4,000 but failed to see increases in workforce participation.

In response, Google simply began “nudging” existing employees for referrals by reminding them about open positions and asking specific questions. Inquiries like “Who is the best salesman in New York?” helped increase the effectiveness of their ERP.

InMobi

InMobi follows Google’s strategy in offering rewards over monetary incentives. The company offers current employees different experiences in return for successful referrals. For an open engineering manager position, InMobi offered the choice between a motorcycle and a trip to watch the sunrise from a volcano in Bali.

Accenture

Not only do current employees participate in Accenture’s employee referral program, but candidates have the option to find people to refer them. Accenture allows anyone applying to search their LinkedIn network for any connections that work at the company and request a referral from them.

Candidates and current employees both benefit from successful referrals. Accenture allows the referring employee to donate money to a charity of their choice.

Questions You’ve Asked Us About Employee Referral Programs (ERP)

Do employee referral programs work?
A strategically designed employee referral program can help improve retention rates, expedite onboarding, reduce recruiting expenses and increase profits. Employee referrals have a 46% average retention rate after one year and increase profits by approximately 25% more than hires from other sources.
How can I promote my employee referral program internally?
There are several ways to promote your employee referral program internally. Regularly marketing the program in company emails, posters around the office and in staff meetings can help create awareness. Highlighting incentives like bonus pay or other benefits in your internal promotion is more likely to encourage employees to participate.
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