What Is an Employee Referral?

Jessica Ellis

Employee referral is a business program that encourages current employees to suggest talented friends or contacts for open positions. The program often runs on a bonus system, where referring employees are rewarded if their candidate is chosen for a job. While employee referral can be an excellent way to take advantage of employee professional networks, it must be run efficiently and fairly in order to be successful.

Professional networking is one way to obtain an employee referral.
Professional networking is one way to obtain an employee referral.

In many companies, employees are in an excellent position to recommend good candidates for available openings. Having insider knowledge about the demands and atmosphere of the workplace may allow workers to think of friends or colleagues who would fit well into the existing pattern. Additionally, allowing employee referral may give management more insight into the character and abilities of a candidate than a simple resume or interview may permit. Since current employees know they may be judged partially based on the performance of their candidates, they are likely to submit highly qualified individuals for consideration.

One of the keys to crafting a successful employee referral system is the correct application of rewards and bonuses. While an over-generous reward may distract workers from performing their actual job, a minuscule bonus program is unlikely to attract much attention. It is important for employers to consider the time and effort saved by having a good referral program when setting bonus levels; getting a ready list of pre-screened job candidates from employees may save a company dozens of hours of interviewing and extensive recruitment costs and may warrant a comparable reward. If handing out monetary bonuses is not cost-efficient, consider offering extra time off, reserved parking spaces, or other non-cash incentives.

Another major factor in the efficiency of an employee referral program is the structure and format of the referral itself. Some companies opt to have employees submit a simple letter of recommendation, but others prefer a more structured system that requires answers to specific questions about the job candidate. Performing regular assessment of the program can help determine if the referral structure is actually providing useful information, or simply filling up space with under-qualified candidates. Businesses may also limit the amount of referrals an employee may submit per year in order to increase the quality of submissions.

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For an employee crafting a referral, honesty and objective assessment are important considerations. While the job may be a great opportunity for a friend, putting an unprepared or ill-qualified person up for interview may reflect poorly on both the candidate and the employee. Inflating expectations about the candidate by writing a too-strong referral can also hurt his or her chances of living up to the glowing praise during an interview.

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