Top 10 Reasons Why Employee Referral Is So Important

Employee Referral

An employee referral program is the single most effective tool in your recruitment arsenal. By encouraging your coworkers to recruit their friends and contacts for open positions you’re greatly increasing your productivity and saving money. And as social networks continue to grow in their reach, empowering your employees to refer candidates becomes even more attractive. 

Whether you’re considering several referral program ideas, implementing a new referral program, or planning to enhance your existing program, keep in mind that referrals are less expensive, faster, and generally more productive hires than those of other talent acquisition strategies. Here’s why they’re so important for you and your company.

Employee Referrals Advantages

1. Better candidate quality

Employee referrals are of higher quality and more likely to be hired than other candidates because employees only refer contacts who they know will be good fits for the position and organization as the recommendation will reflect either well or poorly on his/her judgment. 

2. Speed to hire

In a competitive marker, speed to hire differentiates successful recruiters from also-rans. Hiring via referral is substantially quicker than hiring through a job posting or career site as several steps for your recruitment employees — job description writing, ad posting, resume collection, and candidate screening — are unnecessary when the applicant is a referral. Referral candidates are also more likely to accept offers than other kinds of candidates, further limiting the time needed to fill positions.  

3. Cost

With few exceptions, employee referral programs are more cost effective than other hiring processes: consider the 15 percent fee an executive recruiter could charge on a $100,000/year hire ($15,000) versus a $1500 referral bonus for the same hire. There are no job board charges, agency or search fees — even off-site job fair travel can be minimized or eliminated as your employees will have face-to-face meetings with potential candidates at industry conferences and events. Your internal labor costs are also reduced as you’ll be spending less time working on hires. Even better, the fees are paid to employees, further aiding morale and contributing to higher retention rates.

4. Quicker onboarding

Higher quality hires are generally able to get up to speed faster than other hires. A referred employee has a baked-in relationship with the current employee who recommended them, providing them a go-to person for questions about the job, workplace environment, and company culture. Similarly, referring employees will give extra guidance and mentoring to the new employees to ensure they adjust quickly and are primed for success.

5. Improved retention

Referred employees work at companies longer than non-referred employees owing to the implicit commitment to the friend or contact who referred him/her as well as higher job satisfaction. This works in the other direction, too, as a successful referral is indicative of the referring employee’s growing understanding of the company. This personal investment leads to his/her sticking around longer — and being more engaged — with the company. 

6. Wider candidate pool

In terms of sheer volume, your employees have exponentially more contacts than you alone do. A current employee could have several hundred professional contacts in his social media and professional networks. Multiply that by the number of employees in your organization for a potential reach of tens of thousands — that’s thousands of qualified individuals located all over the world for any given opening. What’s more, an employee referral program expands your recruiting search to include passive job seekers — potential candidates who would otherwise have no knowledge or interest in a new opportunity.

7. Morale boost

Employee referral programs encourage your current employees to emphasize your company’s best qualities when amongst their peers, thus reiterating the positives that make your organization one worth working for. And the right incentives for referrals will make your employees feel appreciated, which will in turn help raise motivation. Note: if referrals aren’t happening, there is cause for concern in the morale department.

8. Counter negative reviews

Sites like Glassdoor provide forums for employees, former employees, and applicants to express their opinions about your company. And while reviews of your workplace are hopefully honest and positive, some comments may dissuade potential candidates from applying. A referral, though, effectively disarms the primacy of your company’s reputation as the referring employee’s understanding of the job and office culture is more authentic and believable than an online review.  

9. Better candidate fit

In addition to being better quality candidates, referred applicants are likelier to share your organization’s values as understood from conversations with your current employees—a bad cultural fit would have been weeded out and not referred. Once hired, these new employees will better align with your company’s vision and mission. 

10. Appreciation for recruitment 

A well-designed employee referral program gives your employees a greater feeling of ownership for the hiring process than a talent acquisition portal can. As such, the recruitment process and your role in the company gets higher visibility, so understanding and respect for your value in the company increases.

Recruiting software optimizes hiring processes so you can focus on what you do best — recruiting.

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