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Employee Referral Programs & The Benefits They Bring


One of the most productive ways to ensure that your company hires the best available candidates is through your own Employee Referral Program (ERP). The ERP is easy to promote and to administer; it not only provides you with pre-qualified candidates it also helps you build goodwill among your existing employees. A well-structured ERP allows existing employees to refer qualified candidates for your open positions, sounds easy enough; here are some ground rules to set:

  • The employee that refers a candidate must know the candidate personally and should be able to verify the candidate’s past work performance or the employee should have worked with the candidate in the past. The referring employee should complete a form that allows them to give a reason for their referral and allows them to indicate why the referral would make a good addition to the company.
  • Employees are paid a graduated referral bonus based on the level of position in question. Four stages usually suffice; one stage for entry-level positions, one stage for experienced candidates, one stage for mid-level and management candidates and finally one stage for executive-level positions if you decide to use the ERP to fill executive-level positions. A referral bonus structure could be based as follows:
    • Stage 1 positions: $500.00 – entry-level candidate hires
    • Stage 2 positions: $1,000.00 – experienced candidate hires
    • Stage 2 positions: $3,000.00 – mid-level and management candidate hires
    • Stage 4 positions: $5,000.00 – executive-level candidate hires

If your company is strapped for cash and monetary referral bonuses don’t make sense then use Paid-Time-Off (PTO) as a reward or perhaps issue the reward in company stock.

  • All employee referred candidates should be officially referred through your company’s ATS (Applicant Tracking System) or through an appointed individual. A properly referred candidate includes a résumé and a completed employment application. Typically referrals should only be made for current open positions.
  • An employee that refers a candidate that is subsequently hired would be paid a referral bonus only after the new hire has worked 90 days or more to ensure that the new hire plans on remaining with the company and their performance have met expectations.

There are several issues to keep in mind when implementing an ERP including;

  • Ensure that as your employees refer candidates for your open positions you promptly review the candidate’s credentials and inform the candidates as well as the referring employee how the candidate stands as a prospect for your open position. Nothing will kill an ERP faster than the lack of response to employees and the candidates that they refer.
  • Use milestones to promote the ERP such as recognizing the employee that has referred the most hired candidates in the past quarter or year or perhaps whenever your company completes a successful hiring spree that can be attributed to the ERP. The key is to build excitement around the program so that employees feel like they want to participate. A quarterly campaign will keep the ERP in the minds of employees and prompt them to refer candidates.
  • Track all referred candidates and the employees that referred them so that accurate and timely payments can be made and so that the results of the ERP can be monitored.
  • Dedicate a web page on the company Intranet site to the explanation of the program and the benefits of participating. Remember to talk about the benefits the program brings to the company as well as the employee. List the steps required to refer a candidate and define what makes up the perfect candidate for your company.
  • Ensure that once an employee qualifies for a referral bonus they are paid promptly because they will be keeping track as to when payment should be made.

A well-structured ERP can be a great resource for candidates for your company’s open positions. It can provide you with qualified candidates, lower your cost-per-hire, lower your time-to-hire, increase the quality-of-hires, and help boost overall morale within your company. Contact us at ATAC to learn more. (919) 263-9477

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