Using Employee Referral Programs to Stay Competitive

Using Employee Referral Programs to Stay Competitive

Key Takeaways:

  • Employee referral programs (ERPs) can help counteract the extended labor shortage by making it easier for companies to attract high-quality talent through their existing employees.
  • A strong employer brand is critical for a successful ERP. Employees with a positive perception of the company and their work experience will likely refer others.
  • Educating employees on the ERP and its benefits is essential. Providing clear and accessible information can increase engagement and participation rates.
  • Beyond immediate hiring needs, a successful ERP can build a strong, cohesive company culture where employees feel valued and invested in the organization’s success.

Recent research reveals that nearly three-quarters of employers have employee referral programs (ERPs). However, while many hiring professionals understand the power of ERPs, not all know how to build an effective one. Referrals make up seven percent of applicants for positions in the U.S. – even in a highly competitive talent landscape, some employers are missing out on a strategy that can give them an edge.


Screenshot 2024-06-10 at 12.49.30 PM

Hiring professionals who want to revolutionize their employee referral programs should learn how to partner with their marketing team, celebrate employees who make referrals, and tap into the team’s competitive streak. They also need to know how to avoid pitfalls like inconsistency, overcomplication, and barriers to entry.

When properly structured, these programs have many benefits, from higher quality applicants to increased company loyalty. Discover how putting in the work to craft a viable employee referral program can help businesses stand out even in a crowded market.


Setting How Employee Referral Programs Revolutionize Hiring

With an extended labor shortage that is predicted to continue for a while, many hiring professionals face challenges getting talent in the door. In a recent survey, 44% of hiring professionals said that talent acquisition is their most common challenge, and 22% considered it their most difficult. 

One way to counteract these difficulties and make finding high-quality talent much easier is to include current employees in talent acquisition efforts. To be clear, running an effective employee referral program requires hiring professionals to build an impeccable employer brand; employees who don’t love their jobs or don’t think the organization is a great place to work may be hesitant to bring others on board.

One way ERPs pay off for employers is by reducing costly turnover. Referred hires tend to stay 70% longer than non-referrals, possibly because referred employees are familiar with the employer brand before they apply. Those who refer employees may stay 20% longer—these employees probably like and resonate with the brand and want others to have the same enjoyable experience in their workplace.

Employee referral programs also revolutionize hiring by helping hiring professionals hit their key performance targets. For example, referred candidates get hired 13 days faster than non-referred candidates, reducing a company’s time to fill. 

Additionally, referred candidates have a 2.6% to 6.6% higher chance of receiving and accepting a job offer. Candidate conversion rates also increased, with 50% to 60% of referred candidates submitting a job application compared to just 5% to 10% of non-referred candidates who found the job through other sources.


Finally, an employee referral program can also bring higher-quality applicants. In many organizations, only a tiny percentage of applicants get job offers. On average, referrals are seven times more likely to be hired than those who found the opening through a job board or other means.

Note: Companies need to streamline the referral process for jobs and hiring events. This means making it easy to refer via mobile platforms like Eqo, which eliminates the hassle of logging into cumbersome internal systems and modernizes the referral experience.


Setting How to Build a Successful Employee Referral Program

Building a successful employee referral program requires some preparation. First, hiring professionals need to partner with the marketing team to create collateral for the program. This may include print materials, digital assets, and a dedicated career site that employees can visit to gather more information and make referrals. These materials should educate employees on the benefits of an employee referral program and how it helps everyone across the organization. Some materials should also be sharable so employees can send them to potential referrals.

Then, it’s time to tap into the team’s competitive streak. Employees love incentives, and offering payouts can go a long way in encouraging them to refer as many qualified candidates as possible. Competitive employees will likely be motivated to stop and look at their networks to see who may be interested and encourage them to apply.

Finally, it’s essential to find ways to highlight employees who participate in the referral program, recognizing their contributions to the company and its ability to reach strategic goals. Their work may be acknowledged in company-wide meetings, emails, and other communications.


5 Benefits of an Employee Referral Program

Employee referral programs have many benefits for employees and the organization. Here are five major advantages an ERP can bring to organizations committed to doing them well.


1. Built-In Connections

Referred employees already have a connection with the organization. They understand the culture and expectations because they’ve talked to someone who works there. When new hires know what they’re getting into, they will likely commit to the long haul.


2. Increased Access

Employee referral programs make it easier for recruiters and organizations to reach and recruit passive candidates. These professionals may not be actively looking for a new job but may be convinced to switch employers if the opportunity is right. This advantage can help employers recruit candidates that other companies miss out on.


3. Increased Speed

Employee referral programs can decrease time to hire so that positions are filled with qualified talent more quickly. Because these employees have already been vetted by someone else working for the organization, hiring professionals can count on having more qualified candidates for open positions. They’ll also have a more extensive talent pipeline for when other positions open up.


4. Enhanced Insight

An ERP may be able to help hiring professionals gauge and increase employee engagement. Participation rates can be a reliable indicator of how enthusiastic – or indifferent – employees are about working for the organization. If an employee doesn’t enjoy working there, chances are they won’t recommend that someone they like follow in their footsteps.


5. Strengthened Relationships

Employee referral programs help employers strengthen bonds with existing employees. This is accomplished through incentives and, listening to employees’ concerns and ensuring their workplace is one to which they would gladly invite friends and contacts. These programs can turn employees into brand ambassadors who speak highly of the organization, its leadership, and its culture.



5 Common ERP Pitfalls Employers Should Avoid

Building an effective employee referral program can be challenging. Here are five pitfalls hiring professionals may encounter and how to avoid them to achieve success. 


1. Complex Programs

The ERP should have a clear mission and goal, and it should be easy for employees to understand how it works. Otherwise, they may be likely to opt-out. Consider educating employees on this information and giving them a go-to contact to ask questions and learn more.


2. Inconsistent Rewards

Some employers make the mistake of allowing different departments to dictate program rules and rewards. Unfortunately, decentralizing the process can lead to inconsistency and confusion. Instead, try to promote clarity by ensuring the process and payouts remain consistent across the board for all employees.


3. Compliance Risks

Hiring professionals understand the importance of privacy laws, which must be followed in the ERP. This means ensuring that referring employees are permitted to share the referee’s contact information. It also means getting consent to contact candidates through SMS and other channels, as well as honoring “do not contact” requests. 

This issue can be solved by having employees share unique links with potential candidates. Referral candidates can then fill in their information and directly consent to the privacy policy.


4. Undervalued Participation

Just because someone was already in the system doesn’t mean an employee should not get credit for their referral. Finding every opportunity to credit employees gives them easy wins and motivates them to continue referring candidates.


5. Inaccessible Front Line

It’s essential to avoid any barriers to entry for the ERP. For example, if an employer limits eligibility to top-performing employees, it may discourage employees and negatively impact the program’s effectiveness. Consider offering open eligibility across the organization as much as possible.


It’s essential to be aware that ERP programs can sometimes limit diversity. This can be especially true if the current workforce is not racially diverse. Implementing mitigation tactics like asking all candidates the same question, evaluating based on the same criteria, or not disclosing to interviewers that the candidate is referred are two considerations to try.


Ensuring ERP Success Means Following Best Practices

Hiring professionals who want to build successful ERPs should ensure they provide attractive incentives and celebrate results. For example, employers can offer quarterly and annual prize raffles to participating employees and give top referrers a shout-out from the CEO. Plugging in a graphic or some verbal support helps make the ERP a part of the company culture.

Additionally, once a referral candidate is hired, don’t forget to celebrate their milestones publicly. One of the best times to engage new hires is at the 30-day mark, so make sure to do something special to show appreciation for the candidate and the employee who referred them.

Finally, it’s essential to realize that both top-down and bottom-up communication are key to the success of any ERP program. Leaders should be able to speak to ERP goals in team discussions. It is vital to give employees language (i.e., “talk tracks”) to help them verbalize the employer brand. When everyone is excited and communicative, ERPs are much more likely to bring the company its desired results.


In a competitive job market with an extended labor shortage, leveraging employee referral programs can be a game-changer for your organization. 

These programs attract high-quality talent, foster a positive company culture, and increase employee engagement. Are you ready to optimize your recruitment strategy with a robust employee referral program? Reach out to us today and start building a stronger, more cohesive workforce!

Subscribe to newsletter


Find Out How We Can Become an Extension of Your Talent Acquisition Team