Six considerations when setting up an employee referral program

How to set up an employee referral program

Define your goals

Outline incentives and rewards

Provide transparent policies and guidelines

Integrate your program with existing recruitment processes

Communicate continuously and train consistently

Monitor and evaluate

It comes as no surprise that employees are considered to be a company’s greatest asset. They are your competitive advantage, and as many organisations are discovering, so to, are their professional networks.

In the quest to attract top talent, organisations are turning to employee referral programs to leverage the mighty power of their workforce.

When designed effectively, employee referral programs can be a powerful recruitment tool. By encouraging employees to refer suitable contacts, employers can enjoy a reduction in hiring costs, and an increase in candidate quality and employee engagement.

With the potential to enhance community and culture within the organisation, employee referral programs require careful planning and consideration to optimise their potential.

Discover how to set up an employee referral program, as well as the six considerations to keep in mind to maximise the results.

What is an employee referral program?

In today’s market, candidates aren’t just looking for a company, they’re also looking for a culture.

Who better to shine a light on your working environment than your current employees? They know better than anyone, what it’s like to be a part of your team – what’s required day to day and, what’s required to get great result.

In fact, they may just know the right people who can add value to your business. According to a LinkedIn study, the average employee will have 150 contacts on their social media networks – 100 employees means around 15,000 contacts (and possible candidates). So, chances are they’ll have a contact in their network who could fare well as a new hire.

With this in mind, developing an employee referral program could be one of the savviest steps you take in your recruitment journey.

These initiatives leverage the power of professional networks. They allow employees to recommend their connections for vacant positions, with subsequent rewards if the candidate is hired.

Talk about a mutually beneficial arrangement!

Benefits of an employee referral program

At Robert Half, we’ve seen a noticeable increase in the number of organisations questioning how to set up an employee referral program.

Bianca Sebecke, Talent Acquisition Supervisor at Robert Half, says the current level of interest speaks to the power of such programs. Bianca says, “the realm of talent acquisition is fiercely competitive right now. Organisations are always looking for ways to level up their recruitment strategies - innovation in the way of employee referral programs is really getting results.”

“By bringing your employees into the recruitment fold, you can poise your business for success. This starts with identifying top-tier talent who not only possess the required skills, but also align with your organisation’s culture and values.”

With so many recruitment methods available, employee referral programs are gaining notoriety for their power to streamline the hiring process. Here we delve into the other benefits of implementing an employee referral program:

Quality talent acquisition – if you want to recruit external top performers, look no further than your internal ones. Referrals from these valued employees are gold! In leveraging the networks of your existing employees, you can access a pool of candidates who are pre-vetted and endorsed by your most trusted professionals. These recommended candidates are more likely to possess the necessary skills and cultural alignment, while demonstrating a higher degree of job satisfaction and long-term commitment. Furthermore, employee referrals have the highest applicant to hire conversion rate – only 7% apply but this accounts for 40% of all hires.

Effective, efficient recruitment – LinkedIn reports that 67% of employers and recruiters said the recruiting process was shorter, and 51% said it was less expensive to recruit via referrals. This comes as little surprise given the accelerated hiring timeline and the reduction in traditional recruitment costs i.e. advertising fees, recruitment fees, and extensive interview processes.

Enhanced employee engagement – by actively participating in the organisation’s recruitment process, employees feel a greater sense of connectedness to the growth and success of the business. Implementing a robust employee referral program has the unique ability to boost morale, company culture and the productivity of the work environment. Furthermore, the benefits that come with referring an eventual hire are enormous for both the employee and the organisation. In referring a connection, the referring employee makes their work experience a more positive one. With familiar faces at work, they feel happier and also, somewhat obligated to remain with the organisation.

Greater employee retention – candidates referred by existing employees are more likely to align with the company’s values and culture. Their added familiarity with the work environment enables them to integrate seamlessly and contribute quickly. Referral hires have greater job satisfaction and stay longer at companies – 46% stay over 1 year, 45% over 2 years and 47% over 3 years.

A stronger talent pipeline – long term talent benefits are a huge draw card for companies looking at how to set up an employee referral program.

Having a solid program helps organisations to manage their future recruitment needs through access to a wide network of potential hires. In keeping employees consistently engaged, you can establish a talent pipeline that delivers a continuous influx of top talent for your evolving business needs.

Employee referral program considerations

While employee referral programs have the potential to greatly expedite the recruitment process, the development of these strategies demands significant time and thought. If you are wondering how to set up an employee referral program within your business, take note of the six considerations below.

In doing so, you can engineer a program that leverages the power of employee networks to attract top talent, foster a sense of engagement, and drive organisational growth and success.

1. Define your goals

Wondering how to set up an employee referral program? First, take a moment to define some clear goals and objectives.

Sure, tapping into a wider pool of talent is an obvious one. However, more specific and measurable goals, will help you to design, implement and track your program and its effectiveness.

Below are some well-articulated examples of employee referral goals:

Diversify the talent pool.

Enhance employee engagement.

Reduce recruitment costs.

Reduce ‘time to hire’ rate.

Defining your goals early on in the process will help to illuminate the wider vision for all involved. With a greater awareness of expectations, your team (and your program) will have a greater chance of staying on track and pivoting appropriately when adjustments are required.

2. Outline incentives and rewards

In order for an employee referral program to gain traction, it needs to have a compelling incentive structure. Attractive rewards such as, cash bonuses, additional leave entitlements or vouchers, can motivate employees to actively participate and refer qualified candidates.

Take the time to consult with your employees about the kind of incentives that would appeal to them. A little research goes a long way!

Consider aligning the incentives with the significance of the role you are trying to fill. This helps to highlight the value of successful referrals, as well as the contributions of participating employees.

Be transparent from the start - clearly articulate the incentives on offer for a successful hire.

3. Provide transparent policies and guidelines

When you’re looking at how to set up an employee referral program, remember that simplicity is key. Employees simply won’t engage with a process that is too complicated.

Communication is critical at every level, particularly when it comes to policies and guidelines.

To ensure fairness and consistency, be diligent in acknowledging all of the relevant terms and conditions. Factors such as reward eligibility and referral criteria, will give employees a solid understanding of the mechanics of your program.

With less potential for misunderstandings, your employees have a greater capacity to engage and contribute effectively.

4. Integrate your program with existing recruitment processes

When deciding how to set up an employee referral program, look at ways to optimise seamless integration with your existing recruitment processes. Explore the ways that different recruitment efforts can work together in tandem to streamline operations and maximise efficiency.

Leverage technology and automation tools to make referral submissions as easy as possible. Understand that referrers and referred candidates will expect the process to be simplified for them. Ensure that they can monitor the status of their submissions (or applications) and be sure to regularly communicate any updates or successes to maintain their engagement.

5. Communicate continuously and train consistently

When it comes to employee referral programs, communication is central to success. Communication and training play a pivotal role in:

emphasising the value of your program

educating employees about the relevant ‘how tos’ and,

encouraging effective participation

Communication and training should focus on regularly promoting the employee referral program, while addressing any employee concerns or challenges.

Workshops, webinars and information sessions, are all ways in which you can equip your employees with the tools to identify potential candidates.

Furthermore, they are an ideal forum to help employees learn how to articulate the company’s values and culture to prospective referrals.

Don’t discount the value of communication throughout the life of your program. Once it is up and running, be sure to:

Provide notifications after an employee referral is made – keep employees in the loop about how their referral is progressing.

Provide feedback to referring employees – foster open communication about the suitability of referred candidates. Offer feedback about how they can continue to recommend suitable candidates in the future.

Prioritise communication with referred candidates – consider them your VIP’s! You don’t have to give them the job but, timely communication is a must.

Promote your program – get your marketing team involved and create specialised campaigns to keep your employees engaged.

Celebrate new hires – take the time to applaud winning outcomes that have stemmed from an employee recommendation.

Thank your employees – show them that you appreciate their efforts and encourage them to continue participating in the program.

6. Monitor and Evaluate

The only way to understand if your goals and objectives have been met, is through regular observation and evaluation. It’s during this process that you will uncover the successes of your employee referral program, as well as the challenges and the opportunities for improvement.

Bianca says the best employee referral programs are always evolving. She says, “in my opinion, companies who work to refine their programs always yield the best results. Take the time to listen to the feedback and suggestions of your employees and hiring managers – they will give you the best insights into the roadblocks of your employee referral program.”

She says, “if you work with them to make considered adjustments, you have a greater chance of boosting the efficacy of your program for employees, candidates and the wider business.”

While evaluation metrics will vary depending on your established goals, it is wise to analyse the success rates of referrals, the quality of hires, and the overall impact on the company's recruitment efforts.

Now more than ever, companies are looking for ways to optimise their recruitment strategies. Greater acknowledgement of the power of employee networks, has left many businesses wondering how to set up an employee referral program. With strategic planning and careful execution, these programs have proven to be a valuable asset in the foundation of a skilled, engaged and culturally aligned workforce.

If you’re still looking for your next ideal candidate in Australia, our experienced team of talent specialists can help.

If you’re seeking advice on any workplace issues within your business, our experienced team of management specialists can help.

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