Employee referrals were formerly considered a somewhat risky practice — an invitation to nepotism and favoritism. But, in reality, having a strong employee referral program can be a very reliable recruiting tool for businesses.
Why? Because most employees would rather walk across a bed of hot coals than recommend a friend or relative who is a bad fit for a role. The evidence suggests, too, that the turnover rate among employees recommended by other staff is typically low.
How to create an employee referral program
Given the evidence of lower turnover rates among recruits found through employee referrals, and the added benefit of increased staff engagement, it's no surprise that more companies today have instituted employee referral programs. Most effective employee referral programs include rewards (e.g., extra vacation days, trips, cash bonuses) for employees who recommend someone whom you eventually hire, and who stays with the company for a specific period.
Before you launch an employee referral program, make sure you consider the ramifications and establish a systematic process for administering it. Some questions to consider include:
- What incentives are you going to offer for employee referrals, and are you going to vary the incentives based on the importance of the job?
- How long does a referred employee need to remain with your company before the person who made the referral becomes eligible for the incentive? (The norm at most companies is between three and six months.)
- What procedure must an employee referral follow?
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