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Employee Referral Programs: How to Implement One Effectively

By: Recruiting Specialist

Employee Referral Programs: How to Implement One Effectively

Why use an employee referral program?

ERPs offer many benefits to a company. Employees who are hired through referrals tend to stay with the company longer than other candidates. And unlike other recruiting methods, which tend to draw only active job seekers, ERPs offer access to passive job seekers – qualified people who have not signaled a willingness to move but who might under the right circumstances when encouraged by a friend or a trusted colleague.

ERPs are also a quick, low–cost and high–quality way of finding staff. A 2005 Canadian HR Reporter survey found that ERPs were the best source of new talent, beating out more traditional avenues such as newspaper advertisements and online job boards.

But ERPs won't do away entirely with the more traditional recruitment methods, like employment agencies, job fairs and newspaper advertisements. Instead, think of ERPs as an additional tool in your recruitment tool kit.

The answer lies in reminding employees that they’re not actually hiring anybody. Instead, they’re making recommendations that will have to wind their way through the company’s usual HR recruitment process. If the candidate makes it through that process, chances are excellent the fit will be right.

How do ERPs Work?

Make your program easy to use, or people won’t participate. Here are some tips:

  • Actively promote the program. Publicize successful referrals throughout the workplace, and keep employees interested during lengthy recruiting campaigns with larger prize draws.
  • Decide what incentives you will use. You can award a standard prize each time, or vary the reward depending on the difficulty of filling a position.
  • Make it simple for employees to spread the word about job openings. Have job descriptions available in the staffroom or on a company intranet for easy distribution.
  • Consider implementing communication and training programs to acquaint staff with the rules and policies surrounding recruitment.
  • Develop a standard form to record details, such as an employee’s connection to a prospect, referral dates and when rewards are due.
  • Reward your employee only after the new hire passes a probationary period. This will help limit referrals of lesser–quality applicants.
  • For maximum impact, issue rewards in a lump sum immediately following the probationary period.

Think your plan through

To be successful, your employee referral program should include a comprehensive plan. When taking the ERP route, it is not enough just to invite employees to go out there and recruit. You might have an employee who is a champion salesperson, but most of your staff would not know where to begin.

Instead, you should implement communication and training programs to acquaint your staff with the rules and policies surrounding recruitment. This is usually also a good time to help staff learn how to talk positively about the company to prospective recruits.

Some companies also ask staff to keep an eye out for talent when they attend seminars, professional association meetings or industry conferences. The goal here is to encourage an eye for talent–spotting, and to ensure that ERPs don't turn into a mechanism by which employees refer only those people they already know really well.

Choose appropriate awards

Common sense should be used in determining employee rewards. Some firms prefer to pay a reward in portions, with part of the bonus paid at the time of hire, with more after the new employee clears probation and the rest after the recruit reaches the first anniversary with the company. Cash rewards have been shown to get people’s attention, but most employees don’t expect vast sums, and many are happy with other incentives, such as free travel or extra time off.

An ERP should not be regarded as replacing traditional recruitment techniques. But with some companies generating 40 to 60 per cent of new hires through these programs, it’s pretty clear they’ve found a complementary system that works. Remember, too, that ERPs also help foster a corporate culture in which staff take responsibility for recruitment and appreciate its importance to the company.

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