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Employee referral | A complete guide for recruiting experts

When looking to source qualified candidates, some recruiters have never considered employee referral as an option, whilst others swear by this recruiting technique and its benefits. So what is employee referral and why is it the rage? What role does it play in a company’s recruiting strategy and what does it mean for recruiters, for referrers and for referees? How to be sure you’re doing all you can to optimise this precious sourcing channel?
Employee referral | A complete guide for recruiting experts

What is employee referral?

Recruiting is an art, and today’s talent crisis all over Europe is bringing its share of challenges to candidate sourcing. Techniques designed to find that rare gem of a candidate abound, but conventional recruiting channels (job boards, vacancies posted to social media, recruiting agencies, etc.) are no longer sufficient or are increasingly expensive.

All this is urging companies to open up to new channels that are capable of addressing contemporary recruiting challenges. These new channels include employee advocacy (employees becoming ambassadors for your employer brand), talent nurturing (engaging your talent pools to forge long-term relationships) and, of course, employee referral.

Integrating employee referral into your recruiting strategy (without necessarily replacing other sourcing channels you may be using) will set you up for success.

Here’s a recap of what employee referral is

Employee referral is an increasingly popular recruiting technique that engages both candidates and employees. This collective engagement is the main strength of employee referral as a recruiting channel, capitalising on company employees and their own networks to identify potential candidates.

The referral in itself is undertaken by an employee who identifies someone from their (usually professional) network who matches the criteria set out in the job vacancy published by the company. After discussing the position and the company with the potential candidate, the employee puts forward their referee. If the person decides to apply for the position, they’ll start the standard recruitment process, by which time the candidate will be nice and familiar with the position and the company. This means that if they do decide to apply, they’ll be really motivated.

As for the employee who referred the candidate, they’ll be rewarded (referral bonus, gift, etc.) if the candidate gets hired.

People often confuse employee referral with string pulling or recommendations, but employee referral is structured, and follows precise rules established by the company.

Find out more: Employee referrals: key definitions

Referees, referrers – Who gets involved in employee referrals?

Usually, recruiters are the only actors to intervene in identifying profiles that match positions needing to be filled. Sometimes with support from recruiting agencies, recruiters usually only work with hiring managers (internal employees looking to hire someone for their team).

Employee referral opens up recruiting to all company employees, whether or not their team is looking to hire. These employees become ambassadors of the company’s employer brand.

  • Referrer: An employee who puts forward potential candidates in their network for a specific role
  • Referee: A contact from an employee’s network who applies for a position within the company after being convinced by the employee to do so
  • Recruiter: Implements rules that govern employee referral and integrates the referee into the standard recruitment process
  • Hiring manager: Meets the referee undergoing the prequalification stage with the recruiter as part of the standard recruitment process

A candidate who gets referred doesn’t have a higher chance of being selected – referrals aren’t a shortcut through the vetting process. That said, their profile might be better quality than others who applied through a job board, for example. This is because the referred candidate will already have received plenty of information about the company, and the candidate’s qualities and skills are nearly always guaranteed since that’s the reason how the referrer identified the referee in the first place.

Find out more: What roles do referrers & referees play?

What is an employee referral programme?

Employee referral needs to be structured if you don’t want it to be assimilated with a recommendation or a string-pulling scenario. It’s thanks to clear rules for all stakeholders that employee referrals succeed in terms of transparency.

A referral programme is the product of any company’s employee referral strategy. It defines the referral process within the company:

  • Vacancies open to referrals (recruiters aren’t obliged to open all vacant positions up for referral)
  • Actions employees can undertake (suggest profiles, share vacancies or corporate content, etc.)
  • Conditions for granting referral bonuses and other rewards
  • Steps of the recruitment process and each person’s role
  • Etc.

No referral programme is identical, but it is essential to have one in place to organise all referral-related activities and make sure everyone understands what’s going on.

The more attractive and straightforward your programme, the more your employees will want to participate and refer contacts from their network. You don’t want to miss out on all that extra potential talent and your employee’s argumentation skills to convince them to apply!

On the subject of convincing, a Nielson report revealed that 78% of respondents said they placed more trust in information provided to them by their peers than by the brand itself.

What benefits are there to leveraging employee referral?

There’s a reason why 80% (Career Builder) of employers consider employee referral to be the best sourcing channel in relation to ROI.

Introducing employee referrals brings plenty of benefits for all those involved in the process.

👉 Looking to implement a digital referral programme? Request a demo

Employee referral as a tool for companies and recruiters to attract qualified talent

According to a study by HR Cloud, 73% of today’s candidates are passive candidates. This figure does, of course, vary depending on factors such as the period under consideration, industry, and job family.

But the point is: Don’t bypass candidates who aren’t actively job hunting but who may be open to new opportunities. You might be able to convince them to embark on a new career experience.

Oftentimes, candidates who are already employed have the qualities you’re looking for, but they’re difficult to reach. This is where employee referral can help. Even though these potential candidates aren’t scouting for opportunities, they’re still likely to have a professional network, so if your employees share your content or vacancies, there are chances potential candidates may come across these posts, without you having to shell out to publish more vacancy offers.

More than a recruiting channel that works for passive candidates, employee referral also operates as a filter for applications – no employee will refer someone they don’t trust, because their own reputation is at stake.

According to HR Tech Weekly, one out of 5 referees gets hired compared to one in every 100 for candidates who apply through conventional recruiting channels. Although it has been proved time and time again that these applications are generally of great quality, there are always avenues to keep improving your chances of finding even more qualified referred candidates, or simply increasing the number of referrals.

Find out more: Employee Referrals: how to improve the quality of applicants

Contrary to popular belief, employee referral doesn’t tend to produce clones. Referrers and referees might share some similarities, but referred profiles are not identical to their referrers. It may be true that the networks of your employees are probably made up of people from the same companies or universities, but they won’t necessarily have worked in the same teams or department, and they won’t necessarily have the same experience, etc. They may, however, share the same corporate expectations, which is great, because it means that what your company has to offer is enough for your employee to try to get one of their acquaintances to join your organisation!

What benefits do referrals bring employees and referees?

The main advantage for employees and referees is simply that they feel integrated and involved.

In fact, referees tend to stay on in the company 70% longer than employees recruited through another recruiting channel. (Icims) This goes to show how relevant employee referral can be in establishing a long-term relationship based on trust between the company as an employer and its teams.

As for referrers, employee referral helps them feel fully integrated in company life as contributors to its development and success. It is, of course, also a great way for them to earn rewards based on their participation in referral-based hiring. Rewards can be granted in the form of bonuses, advantages in kind, gifts, etc. – depending on the terms of the referral programme.

And last but not least, the company itself is also an obvious winner, with high employee engagement and loyalty levels. It’s win-win for everyone.

How does employee referral benefit onboarding?

We mentioned earlier that referred employees stay on longer. This might be down to the adequacy of their profile and personality with regard to company principles,

but another reason might be the quality of the onboarding process. According to Workelo, 80% of new employees will decide that they’ll stay or leave their company 6 months in to their new job.

Employee referral is great for offering quality onboarding experiences in that the discussions between the referrer and referee will have provided the referee with a good amount of information about the company, including:

  • Team organisation
  • Company objectives and projects
  • Tools and processes
  • Company culture
  • Etc.

It’s easier to integrate into a team and company when you know how they function – and, of course, when you already know someone who works there!

The impact of employee referral on internal communication and employee retention

Employee retention is a very real issue for any company. In addition to opportunities for professional development, salary increases, training, interesting projects, etc., employees also expect transparency on life at the company.

That’s what internal communication is for. Explaining, informing, engaging – internal communication can leverage employee referrals to improve regularity. In addition to having your employees share job vacancies as part of your referral programme, you can also get them to share other corporate content to their networks. Guide them towards some best practices – they’ll find this useful, and it’ll be beneficial to you.

Plus, most referral programmes leverage gamification (find out more about gamification below) and provide the opportunity to organise contests, spotlight employees who have been particularly active, or otherwise engage your employees on HR topics. As such, employee referral is a great way to give some well-earned visibility to HR and recruiting operations within your company.

Find out more: Establishing a communication strategy for your referral programme

Building and bringing a referral programme to life

We’ve defined employee referral ✓. We’ve set out what the benefits are for all stakeholders ✓. This brings us to the question: How do you actually implement a referral programme within a company? Read on to find out how to leverage employee referral in your recruiting strategy.

Defining referral objectives for the company

First off, setting up employee referrals isn’t necessarily in every company’s interests. It is particularly recommended for companies looking to hire very specific profiles, including roles that are difficult to fill. Some companies that hire en masse profiles that are easier to find won’t necessarily need to implement a referral programme.

The first step therefore is to see where you stand regarding your recruiting needs, i.e. where your struggles lie and where you think your employees could help in digging up some quality talent.

Which positions and candidate profiles to open up to referrals?

Before establishing and launching a referral programme, you need to be able to answer a number of questions. For example, which positions do you want to fill thanks to referrals (roles requiring technical skills, management roles, etc.)? How available are your employees to contribute to referring profiles? What could you do to motivate them? Etc.

Even if your vacant positions aren’t technical in nature, you can still leverage employee referral to seek out profiles with specific soft skills.

Don’t establish your list of objectives and priorities by yourself – probing all internal stakeholders will make your referral programme more relevant and appropriate for your company.

Best practices for successfully launching a referral programme

Here are some general best practices that you should keep in mind to make sure you’re heading in the right direction when designing your referral programme:

  • Defineclear selection criteria so employees know exactly what type of profiles you’re looking to hire
  • Make theprocess quick and simple to avoid putting off referrer employees and referees
  • Be transparent regarding your rewards and bonuses as well as the conditions associated with earning them
  • Communicate regularly through available channels to explain the referral process and encourage employees to participate
  • Involve team managers so they can in turn motivate their coworkers to participate in your referral programme
  • Share content that showcases aspects of the company (culture, objectives, benefits, etc.) to enable employees to share content themselves
  • Regularly probe referrers and referees to improve your referral programme

But there are traps you should avoid. For instance managing your referral programme manually, not monitoring key performance indicators, amalgamating employee referral and pulling strings, etc.

Find out more: Employee referrals: DOs and DON’Ts

👉 Looking to implement a digital referral programme? Request a demo

How can you be sure your referral programme will perform well?

One thing is certain: Don’t launch your referral programme without beforehand defining areas for improvement regarding your current strategy. Not receiving enough applications? How many more would you like to be receiving? Need to increase your conversion rate? Decrease the number of interviews you’re conducting? Do you need to improve your reputation as an employer?

Only then will you know how to measure the performance of your referral programme.

Depending on your strategy, we recommend you monitor indicators such as:

  1. Employee engagement rate at all stages of the referral programme
  2. Conversion rate (candidates/hired) with referrals compared to other channels, and generally
  3. Time-to-hire with referrals compared to other channels, and generally
  4. Cost-to-hire with referrals compared to other channels, and generally
  5. Candidate satisfaction rate and employee satisfaction rate

Animating your referral programme over time

Launching a referral programme is just the first step. You then need to bring it to life and keep it running over time. To achieve this, you must:

  • Follow your initial action plan and analyse results in order to make any necessary adjustments
  • Include employee referral in your internal communication plan
  • Identify motivated employees, train them, stimulate interest and turn them into ambassadors for your referral programme
  • Highlight successes and share key figures
  • Capitalise on referees who weren’t selected, by adding them to your talent pools

Rewards and referral bonuses: making the right choice

This is one of the most touchy issues surrounding employee referral and a subject that sparks much debate among recruiting teams. In fact, some companies may even miss out on the benefits of employee referral just because they fail to make the right decisions regarding this aspect. And that really is a pity.

Should you introduce rewards for employee referrals? If so, how to go about it?

Is it mandatory to offer a referral bonus?

The answer is yes. Although referral bonuses may not be a legal requirement, it is widely accepted that providing a reward for a referral is highly advised, and most referral programmes nowadays follow this format.

This doesn’t mean that every employee who refers a candidate will receive a bonus. Generally, companies reward employees who make successful referrals, i.e. who refer profiles who will have successfully:

  1. Applied for the position
  2. Undergone all recruiting stages
  3. Been selected by the company
  4. Signed their employment contract
  5. And (optional) passed their probation period

You can also consider rewarding, to a lesser extent, employees whose referees pass only some of the above stages. But remember: Rewarding doesn’t necessarily mean granting a bonus.

Rewards can also be associated with smaller actions as defined by your referral programme: sharing job vacancies and employer brand content, participating in job dating events, etc.

Bonuses, gifts, rewards – What are your options for showing employees your appreciation?

Your employees may be fine with participating in your referral programme for nothing in return, but if you want to be sure to motivate your employees as much as possible, you need to provide rewards. Depending on your referral programme, you may want to consider the following options:

Type Conditions
A referral bonus of an amount determined based on the position you need to fill For employees who referred a profile that got hired and passed their probationary period
A gift voucher to use online, or a charity donation For employees who referred a profile who made the recruiter’s shortlist
An annual dinner or team-building activity For all employees who made 1-5 referrals over the year
Corporate goodies For employees who shared at least one piece of corporate content monthly to their network

These are just a few examples – let your creative juices flow (budget allowing of course) to determine rewards and referral bonuses that best fit your strategy.

Find out more: Determining your employee referral bonus

What employee referral really costs companies

Employee referral is often poised as one of the sourcing channels that generates the best ROI. The main cost involved in setting up a referral programme will be the amount of the referral bonus (and attendant charges) and any additional rewards.

You can choose these costs and control them. Above all, you won’t be granting these amounts if the referral doesn’t come to fruition.

We recommend that you leverage a solution to digitalise your referral programme, adding it to your everyday toolbox. If you choose to acquire a digitalisation tool, don’t forget to add its cost to the referral bonus amounts. And even if you do add this indispensable tool to industrialise your referral programme (and optimise performances), the cost-per-hire through a referral will nearly always be lower than the cost-per-hire through another channel.

This is also partly due to the fact that recruiting costs take into account turnover, and candidates that get hired upon referral are much more likely to stay longer in your company.

👉 Looking for a tool that allows you to automate your referral programme easily?

How can gamification improve employee referral?

You can implement a referral programme without a bonus or rewards system, but as we’ve demonstrated, this means taking the risk that your employees won’t warm up to your programme.

Equally, the lure of money or gifts isn’t the only source of motivation for employees to engage in a referral programme with bonuses or other benefits. The prospect of being rewarded is appreciated, but so is the prospect of playing a game!

What is gamification in the context of employee referrals?

Gamification is the application of typical elements of game playing to other areas of activity undertaken in a professional context.

Find out more: What is gamification?

In recruiting, gamification is mainly linked to employee referrals and employee advocacy (being an employer brand ambassador). Each action can be rewarded, as can the attainment of each stage – just like in video games, which is where gamification techniques are inspired from.

Gamification and employee referral, the perfect combo for motivating teams

Why do gamification and employee referral work so well together? Employee referral isn’t an obligation; employees refer candidates on a voluntary basis! One of the purposes of introducing referrals is to involve employees and motivate them.

Associating each referral-related action with a form of reward at fair value is also a great way of organising challenges inside the company, which every employee can participate in even though their network might not abound with hard-to-find profiles. Ensuring everyone is on equal terms is always beneficial.

One of the main advantages of digitalising employee referrals is that you can automate your whole referral programme, to the extent that what used to appear complex to you suddenly takes a turn of simplicity.

👉 Looking for a tool that allows you to automate your referral programme easily?

What if digitalisation was the key to a successful referral programme?

It’s worth going down the digitalisation route if your referral programme is currently managed manually. If you haven’t introduced employee referrals into your company strategy yet, consider implementing a digitalised referral programme from the get-go. You’ll see results quicker, and more easily, in addition to spending less time managing it.

Automating and simplifying referrals for recruiters, referees, and referrers

Digital referral programmes carry several advantages that are all tied to simplification:

  • A digitalisation tool presents your referral programme as a points-based system for each action (with limits which you can define)
  • All contacting actions are automated, meaning you don’t have to send any emails manually
  • Each referral can be monitored through a tool that can be used by the recruiter, the referrer, and the referee, ensuring full process transparency
  • Automation accelerates time-to-hire and improves candidate satisfaction
  • Performance data for your referral programme is available in readily understandable and sharable formats
  • Etc.

Behind an efficient referral programme, there is necessarily a digitalisation solution.

Referral platform bonuses to boost your programme

Employee referral platforms offer interesting features that will make your life easier.

Feature Advantages
Easy access Desktop and mobile application availability, for all types of use
Sharing to social media accounts Content sharing automation on your employees’ social networks
Activity log Referral process logging to measure programme efficiency over time
Newsletter Automatic newsletters sent to company employees to encourage them to participate

These are just a few examples – make sure to explore what else is available.

How to choose the right employee referral solution?

There are several tools out there on the market that will help you digitalise employee referrals in your company. To choose a solution that meets your needs and specificities, pay attention to 3 important criteria.

More than just a tool, a platform

The solution you end up going for might also offer other tools that will help you recruit. These may include a system for managing your ambassadors programme, another for animating your talent pools, etc.

A platform that integrates with your ATS

You can’t afford to waste time managing multiple tools that don’t integrate together. Choose an employee referral platform that is capable of communicating automatically with your existing digital ecosystem, including your ATS (Applicant Tracking System).

Conformity with respect to GDPR requirements regarding referrals

Make sure you choose a solution that respects all applicable requirements in the GDPR (General Data Protection Regulation) in order to ensure the protection of your future candidates’ data.

👉 Looking for a tool that allows you to automate your referral programme easily?

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