The highest-performing employee referral programs deliver 30-40% of hires from internal recommendations. Research shows that employee referrals are more likely to land hires than many other talent acquisition methods, making it clear that great talent knows great talent.

In today’s dynamic talent market, an internal employee referral program may be the solution to some of your most pressing hiring challenges. The average employee has 150 contacts on their social media networks. If you have 100 employees, that means you have 15,000 possible new candidates. Employee referrals can feed your talent pipeline with quality talent, improve your cost to hire and time to hire, and boost employee engagement and retention.

It takes just five steps to get started building a successful referral program:

  1. Build your business case. 
    The first step in creating any new program is to build your business case. Answering the question, “Does this make sense for my company?” will require you to think critically about the program fundamentals and design. 
    Assess how the new program will align with your company’s existing bonus strategy. You’ll need to consider incentive structures and the budget required to support bonus payouts to referring employees. 
    Your business case should also articulate how the program will impact critical hiring metrics like time to fill, cost per hire, offer acceptance rate, and hiring diversity.

  2. Gain executive buy-in.
    When you present your business case to leadership, go further than explaining program rationale and design. The executive team will likely want to understand anticipated outcomes. Gain their approval by showing them these compelling data points:
    • Employers largely see positives from referral recruiting: 67% say the process is shorter, and 51% say it's less expensive. Employee referrals can help you fill positions faster and cheaper.
    • One study found that more than 45% of employees referred by someone they know will stay at a company for more than four years. Only 25% sourced through job boards stay for longer than two years.
    • Time to start date via referrals averages 29 days compared with 39 days via job boards and 55 days via career sites.

  3. Design your internal marketing and communications.
    Preparing for the program launch is an opportunity to extend your brand and foster your company culture. Designing an internal marketing campaign will help you build and sustain awareness and keep referrals in the queue. Use the following tactics:

    • Help employees articulate your employee value proposition (EVP). If you’re asking employees to spread the word that your company is a great place to work, give them something to say. A few key talking points can help them describe your organization in a compelling way.
    • Communicate the program as part of your onboarding process. Asking new hires if they know anyone else who would be a good fit for the company can instantly lead to additional candidates and emphasizes your commitment to the program.
    • Plan periodic program reminders. Keeping your employee referral program top of mind for referrers requires consistency and creativity. Consider a fun strategy like a recruitment happy hour or meet and greet, where employees can invite potential referrals to an event where they’ll see your EVP in action.

  4. Create compelling incentives.
    Before they begin filling your talent pipeline, your internal teams will want to know, “What’s in it for me?” Designing the right bonus structure comes down to understanding how to align your incentives to what your employees want.

    Referral program bonus structures vary widely, and many companies have used outside-the-box thinking to design incentive structures. Some employers even offer experiential rewards, giving referring employees a choice of bucket list experiences.

    The most common incentives include cash bonuses, gifts like company-branded swag, and “points” that can be redeemed for things like flex time. Also, don’t underestimate the value of intangible rewards, like recognition in company-wide meetings. For many employees, sincere appreciation for their willingness to refer friends and family can be as motivating as any trinket they receive.

  5. Sustain your program with tech enablement.
    The best employee referral programs do more than fulfill short-term talent needs. When referrals become common practice and embedded in your culture, you’ll worry less about where you’re sourcing your next hire.

    Scaling and enabling the program with technology is a great way to support your talent acquisition team and automate processes. Think tech-enabled collection forms that generate a candidate profile upon completion. This type of tech solution gives employees a simple way to submit referrals and recruiters an easy way to follow the leads they receive.

An internal employee referral program can save time and money and boost engagement across your workforce. In just five steps, you can structure a program that delivers long-term rewards.