Why your organisation needs an employee referral program

There is no question that finding the right talent can be a daunting task. In many cases, employers are battling skills shortages and are on a never-ending treasure hunt trying to find the employee with the right skills, experience and aptitude to slot right in.

Traditional recruitment methods often fall short in identifying candidates who not only possess the required skills but also fit in well with the company culture. But have you considered that your best recruiters may already be on the payroll? Well, this is where an employee referral program (ERP) comes into play.

An ERP leverages the networks of existing employees to identify and attract potential candidates, offering a range of benefits for both employers and employees. And when you think about it – a happy, engaged and performing employee is perfectly positioned to cast the recruitment net for you and bring back only the best for consideration.

What is an employee referral program? (ERP)

An employee referral program is a structured system where current employees recommend potential candidates for open positions within the organisation. They can also be extremely good at tapping into the passive market and presenting a candidate to you that may just be perfect for the project due to commence in the coming months.

These referrals can come from the employees' professional networks, personal connections, or social media contacts. Furthermore, employees are only looking to bring in the best and are going to do a much more authentic job at selling the EVP. In return, employees often receive incentives, such as bonuses, recognition, or other rewards, if their referred candidate is successfully hired and remains with the company for a specified period. When done well, everyone wins.

Why your organisation needs an employee referral program

There are many reasons why your business would benefit from an ERP. Here are just a few:

1. Higher quality hires: Referred candidates are often pre-screened by the referring employee, leading to higher quality hires who are more likely to fit the company culture and perform well. This ensures that your organisation brings in talent that aligns with your values and work environment. However, employers should always be aware of the ‘like me’ bias where employees sometimes seek to bring in people with strong similarities which can dilute the diversity pool.
2. Cost-effective recruitment: ERPs can significantly reduce recruitment costs by minimising the need for external advertising and recruitment agencies. This allows your organisation to allocate resources more efficiently and invest in other critical areas.
3. Faster hiring process: Referrals typically move through the hiring process more quickly than candidates from other sources, reducing the time-to-fill for open positions. This speed is crucial in a competitive job market where top talent is often snapped up quickly.
4. Increased employee engagement: Employees who participate in referral programs feel more involved in the company's growth and success, leading to higher levels of engagement and job satisfaction. Engaged employees are more productive and contribute positively to the workplace culture.
5. Lower turnover rates: Referred employees tend to have higher retention rates, as they often have a better understanding of the company culture and job expectations from the start. This stability is beneficial for maintaining a cohesive and experienced workforce.

Considerations before implementing an employee referral program 

Whilst there are clear benefits of an ERP, there are some key aspects employers should consider before jumping into this initiative:

1. Clear guidelines and criteria: Establish clear guidelines and criteria for referrals to ensure that employees understand what types of candidates are needed and what the referral process entails. Communicate this clearly with employees to position the program for success.
2. Incentive structure: Design an attractive and fair incentive structure that motivates employees to participate without causing resentment or competition among staff. Ensure that there are no tricks or that it is not filled with too many rules.
3. Program promotion: Actively promote the ERP within the organisation to ensure that all employees are aware of the program and its benefits. Share examples of when this has gone well. If there is a particular team that struggles to fill roles, consider an incentive specifically for that team. This drums up strong interest and engagement – encouraging the employees to do the leg work of finding quality candidates.
4. Tracking and measurement: Implement a system to track referrals and measure the program's success. This includes monitoring the quality of hires, time-to-fill, and retention rates of referred employees.
5. Legal and ethical considerations: Ensure that the ERP complies with all relevant laws and regulations, and that it promotes diversity and inclusion within the organisation.

6 Tips for implementing an effective employee referral program

If you have decided that an ERP is the right strategy for your business, here are some tips to enhance success:

1. Communicate clearly: Clearly communicate the goals, guidelines, and benefits of the ERP to all employees. Use multiple channels, such as emails, meetings, internal company social media and newsletters, to spread the word.
2. Simplify the process: Make the referral process as simple and straightforward as possible. Provide employees with easy-to-use tools and resources to submit referrals. Consider an ERP policy.
3. Recognise and reward: Regularly recognise and reward employees who make successful referrals. This can include monetary bonuses, public recognition, or other incentives. Be true to your word and don’t drag your feet in applying the reward.
4. Provide feedback: Keep referring employees informed about the status of their referrals. Providing feedback helps maintain engagement and encourages future participation.
5. Encourage diversity: Promote the ERP as a tool for enhancing diversity within the organisation. Encourage employees to refer candidates from diverse backgrounds and experiences.
6. Monitor and adjust: Continuously monitor the program's performance and make adjustments as needed. Solicit feedback from employees to identify areas for improvement and ensure the program remains effective.

Your secret weapon

An employee referral program can be a powerful tool for attracting high-quality talent, reducing recruitment costs, and enhancing employee engagement. When done well, it works as a secret weapon for employers by letting workers do your leg work and bring talent to the business that you would never have found. When the magic happens, it makes sense to reward employees for their efforts as this encourages them to always be on the lookout.

Furthermore, when employers take the time to carefully consider the program's design and implementation, they can create a successful ERP that benefits both the organisation and its employees. There is no question that with clear communication, attractive incentives, and a focus on diversity, an ERP can become an integral piece of a company's recruitment strategy. Who knows, maybe your team member will find the employee you have been looking for at their child’s soccer match this weekend.

Further information

For assistance with your workplace matters, Members of Ai Group can contact us or call our Workplace Advice Line on 1300 55 66 77 for further information.

Members can also access these supporting resources:

- The role of an Employee Referral Program

- Guide: What is an Employee Referral Program?

- Sample - Email to employees about the employee referral program

- FAQs - Employee Referral Programs (ERP)