How to Create a Successful Employee Referral Program

A team discusses how to hire for culture fit.

If you want your talent acquisition efforts to net big results, you’ll need to employ multiple tactics year-round, even when you don’t have any specific staffing needs. One of these tactics is the use of an employee referral program, which is often presented as a perk, but can also save your company time and money when recruiting.

These programs are a great way to recruit talent because your best employees may have similarly qualified friends, former colleagues, and other connections. By creating incentives, such as cash or other valuable rewards, your employees will be motivated to refer their connections who may be a good fit.

We’ll take a closer look at the following steps and best practices for creating an employee referral program (or ERP) at your company:

  1. Conduct an audit of your hiring needs, recruiting, challenges and company culture
  2. Allocate necessary resources to reach your stated goals
  3. Design your ERP, but keep it simple
  4. Choose suitable rewards for your program
  5. Clearly communicate your ERP, and recognize referrals, with current staff

1. Take Stock of Your Current Staff and Hiring Needs

When you’re planning an ERP, the first thing you want to do is determine your existing hiring needs and take stock of your human resources. The following questions will help you make these determinations from the standpoint of staffing needs, employee motivation, and company culture:

  • What types of positions do you need to fill?
  • Are some positions significantly more difficult to fill than others?
  • What do your employees like the most about your company and the work they do?
  • What motivates your employees the most?
  • Describe your company culture; is it traditional, progressive, formal, or casual?

2. Set Goals and Allocate Resources

In order to get the most out of your employee referral program, it’s crucial that you set specific, measurable, and timed goals. For instance, you may want to bring in a certain percentage of more qualified job applicants, increase the total number of applicants by a certain factor, or reduce your hiring cost by a certain percentage within a six-month period. If you do this, you’ll be able to track its success and make any necessary adjustments.

Once you’ve done the prep work, you’ll want to determine the staff, time, and monetary resources needed to pursue those goals. It’s a good idea to have a main point person to lead your ERP, who can then delegate to others as needed. Be careful not to take your workers’ attention off their day-to-day tasks too much, and always make sure your targeted budget has been cleared before you proceed (it helps to explain it in terms of return on investment).

3. Keep the Design of Your ERP Simple

Don’t overcomplicate it. Ensure that your ERP is simple to use for your employees and recruiting team. One way to accomplish this is by using HR software that automates the process. For instance, some programs have email templates with social media links that your employees can share whenever there’s a staffing need. When one of their connections applies for the job, the program tracks that a given employee referred that person.

You’ll also want to draft a few rules for employees, such as what happens when more than one employee refers the same person or how long a new hire must stay in the position in order to receive an award.

4. Choose Rewards for Your Employee Referral Program

Most companies offer cash incentives for referrals, typically $1,000 and up. Ideally, though, you want to figure out what actually motivates your employees. Maybe they’d prefer a few extra vacation days, or perhaps one of your company’s products (if applicable, of course). Other ideas for prizes include the following:

  • Tickets to sporting events or concerts
  • Money toward their favorite charity
  • Airfare
  • Gift cards
  • Health club membership

5. Announce Your ERP and Recognize Successful Referrals

If you’ve gotten this far, then you’re well on your way to finding great recruits—but you won’t see much (if any) success if you simply bury it on page 34 of the employee handbook. You need to announce it so it’s front and center in your employees’ minds. Consider organizing a kick-off event with snacks and refreshments where you give a presentation on how the program works and how it benefits the company, while discussing it as part of your onboarding process.

Make it easy for employees to remember about your ERP with fliers in the break room, online resources, and occasional mentions in the company newsletter. When employees refer candidates who end up getting hired, recognize and thank them for their contribution. It not only provides a boost to company morale, but also may inspire others to refer candidates themselves.

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A team discusses how to hire for culture fit.