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Small Business Tips

How to Set Up an Employee Referral Program

Manasa Reddigari

You hire the best. Right? Those great hires can help you find other great hires. Here's what you need to know about an employee referral program.

What is a referral bonus program?

An employee referral program is simple:

  • You encourage employees to recommend people they know for open roles
  • If they get hired, the person who refers receives a reward

Your great employees will want to work with other great people they know.

Tips for an effective employee referral program

An employee referral program can help attract top-quality candidates sourced from your trusted employees' networks of vetted experts. Use these tips to build an employee referral program that is mutually beneficial for you and your employees.

Define clear criteria for a successful referral

Your employee referral program won't generate successful leads if you don't know what makes a good hire. Give referrers access to a job description or a clear set of expectations for any job your business hopes to fill. That includes both suggested skills and fit for your business culture.

Be sure to stay legally compliant with anti-discriminatory policies. You cannot express a preference for candidates based on protected statuses such as race, age or gender.

Employ the KISS principle

The famous design principle "Keep it simple, stupid" is also the key to building an effective employee referral program.

Don't require employees to fill out extensive paperwork or supply a lot of supporting documents to make a referral. Too many hurdles may discourage workers from making referrals.

Only request the information you truly need about a candidate. Minimal info can include the contact information for the referral and the referrer and the job title. You may opt for social media tools like LinkedIn Referrals to make it easy for employees to make referrals.

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Stay in-sync with referrers

Applicants hate the lack of communication involved in the hiring process. Referrers feel just as frustrated, too.

You should strive to send a notification to the referrer when his referral was received and when a hiring decision has been made. If the referral was not hired, it's helpful to provide feedback to the referrer about what kind of experience they would prefer to see in a candidate.

This gives the referrer the information he needs to refer a closer match.

Reward successful referrers

With employee referral programs that have generous referral bonuses, companies can find great job candidates through recommendations from their current employees. Small businesses without hefty financial resources can still incentivize referrers in other ways.

Consider giving a small cash prize, paid time off, a trip or tickets to local entertainment. These will provide referrers with an extra incentive to seek out the best candidates they can find.

You may increase the value of the reward if the position is highly sought after.

Make referrals easy

Put the referral process in your business website. A clear referral program encourages applicants to seek out people they may already know.

Or, you can simply allocate a box on the job application for the candidate to list the name of the employee who referred him or her. This way, an employee who may not have a chance to submit a referral can still obtain credit for a successful referral.

Take regular stock of past referrals

Periodically analyze the quality of referrals hires versus other hiring approaches. A quick review will help you assess whether your employee referral program is successfully attracting and keeping quality hires.

Is the program resulting in ill-fitted or short-lived employees? You may need to tweak the criteria you provide to referrers about what makes a strong referral.

Not getting enough referrals? Consider simplifying the employee referral program or providing greater incentives to employees to participate.

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