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Importance & Management of Employee Referral Programs

Referral program

Employee referrals are perhaps the most reliable method for companies to recruit talent.  As per a study by Jobvite, they account for about 30% of the total hires. There is a factor of trust involved in referrals and this makes it influential in the company’s success. We analyze what makes employee referrals one of the top methods for recruitment:


You do not need to spend any additional amount for employee referrals other than the benefit or referral bonus to the referee. You also save on job board fees and recruiting agency charges. This helps companies save up to $3,000 per hire when they use employee referrals instead of

Better Quality of Candidates

Your employees are more likely to refer candidates who are skilled at the job and a good fit for the company culture. This ensures that you hire quality candidates, who are efficient and productive. It can also help reduce the attrition rate.

Faster Time-to-Hire

As the candidates have already been vetted in part by your employees, it reduces the time and effort needed on the part of your HR team. This significantly reduces the effort and time to hire.

Increased Retention Rates

As the candidates are referred by someone within the company, they have a connection with them; and as result, these candidates are likely to stay with the company for a longer term. Also, companies usually release the referral bonus to the referee after a particular time period. This further helps in increasing retention rates and lower turnover.

Referral programs have proven to be successful for companies of every size. Here are a few examples.


The company offers employees up to $3,000 for each successful referral. In 2018, about 51% of Google’s hires were from employee referrals.

Ernst & Young

Ernst & Young has been able to increase its diversity hires by offering its employees $10,000 for each successful referral.


The company has hired 60% of its workforce via employee referrals by offering $2000 for each successful referral.

If you are still choosing, here is our comparison of internal vs external hiring process and their pros & cons

Management of Employee Referral Programs

Just setting up a referral program is not enough, you need to ensure that you manage it efficiently. Here are some tips on how to go about it.

Set clear guidelines

Have clear guidelines in place for eligibility, the process of submitting referrals, and the rewards. It ensures that referrals are smooth and there are no conflicts.

Maintain communication

Regular communication with employees is key to the success of any referral program. It includes promoting the program, providing updates, and thanking employees for their referrals.

Track the effectiveness

Some of the metrics that can help track the effectiveness of the program are the number of referrals received, candidates hired via referrals, and the success rate of those candidates

Be fair

Give all employees an equal opportunity to participate in the program. This attitude can help you maintain diversity in the workforce and significantly improve the quality of hire.

Employee referrals are thus an important part of any recruitment strategy. However, you must ensure that they are structured well. Also, keep revisiting the strategy, removing bottlenecks, and improving on them continually to increase their effectiveness.

Written by

Shortlyst Team

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