How an Employee Referral Program Works

Are employee referral programs effective? The short answer is, Yes!

This article will provide answers to:

  • Employee referral program benefits.
  • Top two strategies to secure employee referrals.
  • Supporting statistics to help sell your referral program for internal adoption.

Who you know does matter whether you are looking to be hired or looking to hire.

Employee referral programs offer the opportunity to build a strong workforce, making it one of the top strategies for recruiting passive candidates today. Current employees double as your brand advocates and are key to securing referrals from their like-minded network. Your employees know the brand, culture, mission, and with that, they will know the right people to bring into the mix. Who better to bring in top talent than your top employees?

Employee Referral Program Benefits

Employee referral program benefits apply to start-ups and well-established companies. Systematic recruitment tactics take place to build the foundation of your hiring strategy. As you hire great talent, a successful momentum begins as your hiring strategy promotes the employee referral program. With a robust referral program, you can expect the following benefits:

  1. Decrease Cost per Hire
  2. Increase Quality of Hire
  3. Shorten Time to Hire
  4. Optimal Offer Acceptance Rate
  5. Longer Retention
  6. Social Synergy in the Workplace

Cost per Hire

The financial incentive is a fraction of the cost of recruiting and hiring an employee, with incentives on average sitting around $1,000. Referrals reduce the spend across job boards, paid media, social recruitment, event sponsorships, etc.). Not sure you can swing such a hearty financial incentive? Try offering one or two free days of PTO as an alternative.

Quality of hire

With one great hire brings the possibility of many great hires. Invest in a recruitment marketing strategy to hire great talent from the start if you are in the beginning stages of hiring or are going through a transitional hiring period. As you recruit and hire great talent, you gain and hire great referrals, and it is here where the process gains momentum.

Time to hire

Time is cut down tremendously when implementing an employee referral program. Rather than the recruitment team diving into their talent pools, working through responses to ads, and headhunting, candidates are brought right to the recruiters. Recruiters skip the whole rigmarole and move right on to the vetting phase. Should the candidate be a fit, the gears are in full motion on the way to a new hire.

Offer acceptance rate

Referred candidates already have an idea of the business, culture, and position. This is where the power of the referral kicks in. The referring employee has already, essentially, recruited the candidate to the company. The recruiter comes in to seal the deal and complete the process at a more formal level. At this point in the process, there is no reason to continue to sell the candidate, if they are a fit.

Increased retention rates

The research speaks for itself. 56% of referred employees stay over five years in their current position – over 70% stayed in the same position at the time of hire, indicating higher job satisfaction. Chances are if your employees are referring someone, they know that person well – therefore, feel the company and culture are a good fit for their referral, accurately making a good match.

Social synergy in the workplace

Workplace synergy is defined when two or more people produce an outcome better than if they did alone. Like-minded individuals, who get along and come together and produce is all a company can really ask for to be successful.

Two Strategies for Gaining Killer Employee Referrals

Employer Branding

Employer branding is how past, present, and potential employees perceive the company, with emphasis on the present employees in the case of referrals. Employee referrals are all well and good, but if you do not have a strong employer brand with willing brand advocates sitting in the desks, then you do not have a strong referral base to build upon. Taking it one step further, an employee refers someone, what image are you promoting? Keep in mind the message you are conveying to potential employees, the first action once someone is referred is to research the company.

Referral Marketing

You have a strong referral program; you offer $1,000 and a free day of PTO, but do your employees know about it? Market and sell your referral program to your employees. Ensure your employees are up to date on all internal hiring needs, educate the staff on the importance of referrals (read: show them this article), and celebrate successes through internal communications. Acknowledgment keeps the program and its validity in mind.

Lastly, create a smooth referral process. Half of the time, people are hesitant to take the step to submit a referral. Create a process that makes it easy for the referrer to submit; it is here where you clearly state the incentive, as well.


The power of employee referral programs positively impacts controlling costs, speed to hire, quality of talent, and overall employer brand perception. Referrals bring a sense of reassurance to the employer and a sense of pride from the employee. If your hiring process has you feeling stalled on where to begin, please do not get overwhelmed. A solution to this is to seek out a partner to advance your hiring strategy. Contact Profiles today to get the conversation started. Profiles offers creative and marketing professionals for contract, contract-to-hire, direct hire, and project-based work. Supplement those hard to fill positions with an expert that will be an extension of your team.

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