One of the most crucial aspects of a successful business is creating a solid network of qualified candidates. Finding the right applicants, on the other hand, can be difficult. You do not, however, have to complete this duty entirely on your own.
Your current employees can be quite beneficial in attracting top talent to your company. They can contact potential prospects inside their close networks and circles if given a little push and an attractive employee referral bonus. According to statistics revealed by Zippia, 45% of the referred candidates stay longer in a company than those hired through a job portal. Moreover, approximately 82% of employers considered employee referrals one of the highest ROI-producing strategies!
Offering an employee referral bonus is an excellent recruiting strategy. Your current employees are surely to know who would be a good fit at your company, and they are likely to find the right fit!
What is Employee Referral Bonus?
An employee referral bonus refers to an incentive plan given to an employee of an organization to motivate them to gather candidates for a job role within their connections. The referral bonus here is given to the employee once the candidate they referred is hired by the company and completes a certain amount of time with them. However, the bonus program works under different terms and conditions for every organization.
It is unique for every company and is usually based on the period the candidate completes in the organization, the role they are referred to, and the role of the employee who is referring the candidate. There are also different employee referral programs based on the kind of reward you receive, but first, let’s explore the benefits of an employee referral bonus.
What are the Benefits of an Employee Referral Bonus?
In a candidate market where working professionals have a bunch of employment options, an employee referral bonus can save you significant effort. So, if your company is facing challenges in hiring new employees, a referral bonus for your existing employees can be an effective strategy to boost recruitment.
This shows the utmost benefit of an employee referral bonus. Apart from this, there are several such advantages, and they include:
Minimizes the Recruiting Cost and Resources
Employee referral bonuses are a feasible choice regardless of the size of your company. You can not only attract top talent, but you can also acknowledge the efforts of your current employees. You are also saving on company resources needed for the hiring process, and because it takes less time to recruit, the cost of hiring reduces automatically. In fact, even the statistics show that referral employees are known to be 25% more profitable to your organization as they reduce the cost-per-hire, give a lower turnover rate, and perform better in the job role.
Furthermore, employee referral bonuses help you save money on outsourcing agencies and job board advertising. As a result, the entire recruiting process is productive and efficient, and the cost per hire also decreases.
Promotes Quality Hire
Hiring a candidate through an employee referral increases the chances of finding a quality match between the organization and the new hire and improves your candidate pool by 2.6 to 6.6% because the candidates are referred by your current employees; you can be confident of locating those who meet your hiring criteria. This is because, unlike a job board or an external recruiting agency, current employees are more aware of your candidate’s needs. Thus, helping you improve and maintain a high-quality candidate pool.
Aids in Faster Vacancy Filling
According to GoRemotely, hiring through a referral bonus can reduce the recruitment cycle to 29 days earlier than 39 to 55 days when hiring through a job portal because applicants prefer learning about a company from its current employees. This informs them about the company’s onboarding process and other critical needs. As a result, applicants can tailor their resumes to meet the company’s hiring requirements. All of this makes the employee referral program a quicker recruitment strategy. And a faster hiring procedure also contributes to a positive candidate experience.
Strengthens Employee Retention Rate
Employee referral programs aid in retaining newly hired and existing employees. According to research, referrals come with a retention rate of 46% after a year compared to employees hired from job portals (33%) and career boards (22%). And the two years retention rate for a referred employee is 45%, while for a job board is 20% and 14% after three years from the same source.
New hires tend to remain longer since they are fully aware of the company culture and norms. They are likely to accept the position because they resonate with the same. Moreover, when rewarded for a reference, existing employees feel recognized and valued. As a result, they will stay with the organization for a longer amount of time. Both of these factors have a significant impact on the employee retention rate.
Improves Employer Branding
According to Forbes, employee referral programs can be counted as a litmus test for employer branding. They are the test of your branding, as every employee shapes the organization’s brand and narrative.
Because potential prospects prefer to learn about a company from its current employees, recognizing and appreciating your team members becomes even more crucial. When you give employee referral bonuses, your employees are more likely to propose applicants actively. This, in turn, enhances the image of your company. After all, acquiring and maintaining great talent requires a strong employer brand.
What are the Different Categories of Employee Referral Bonuses?
An employee referral program is divided into three main categories that include:
Financial Referral Bonus
This type of employee referral program is where the employee is rewarded with monetary benefits like a cash prize. The financial referral bonus is perfect for employees who consider earning money as their sole motivation to participate in the referral programs.
Some of the common examples of this type include:
Cash Referral Bonus:
Some organizations pay the employee who referred the candidate entirely after the candidate completes a certain tenure with the company. While some choose to pay a lump sum to the employee after hiring the candidate and then the remaining amount once the candidate works for a decided amount of time with them. You can pay the amount with the employee’s paycheck or as an incentive.
Extra Paid Time Off:
As the concept of work-life balance is sprouting among corporates, offering some paid leaves to the employees who deserve it can be an excellent motivation for employee referrals.
Allowing employees to treat themselves to their favorite brands can also be a great referral bonus. While cash is the driving force, most employees will use it to pay their payday loans or something major. But with a gift card, they can treat themselves.
What’s something everyone loves? An amazing fully-paid trip! But save this big-budget referral bonus for referrals that are the most impactful. Employees who come with the most impactful candidate to the organization can be rewarded with a paid vacation to a destination they pick. You can even improve their experience by allowing their spouse or a family relative to accompany them on the trip.
Social Referral Bonus
This type of employee bonus program is given to employees in the form of social praise and recognition. It is perfect for employees who participated in the referral bonuses to be seen as a valuable contribution to the organization.
An example of a social referral bonus includes:
Some employees prefer to stay happy just by being recognized by the company for their hard work and efforts in the organization’s growth. And recognizing these employees by thanking them and awarding them for their referrals in a company-wide approach can be great.
Altruistic Referral Bonus
This type of referral bonus is given to the employee in the form of a socially responsible gift. It is apt for individuals who want to take part in an employee referral program to help out their company or friends.
An example of such can be:
Charity Referral Bonus:
Here, you can donate the decided incentive to your employee’s choice of charitable trust. This will make them feel valued, thinking you support the causes they are entwined with, making them more intrigued to give some more referrals.
How to Create an Employee Referral Program?
Making an employee referral program is not a difficult task when done systematically. Here are some ways in which you can get started:
Determine the Hiring Needs
Before structuring the referral program, determine the current recruitment needs of your organization. Some questions that can help you understand this are:
- What types and how many positions need to be filled?
- Are some of them more difficult to fill than others?
- Are you coming up with a referral program for every position that needs to be filled?
- Do you think you positively influence your employees and do they like working in the company?
- What kind of company culture is followed in the organization? Is it casual, formal, progressive, or traditional?
Come Up With a Plan
Nothing can proceed without a strategy. Even a successful employee referral program requires a well-planned action plan that encourages employees to refer and prioritize the program.
Think about the goals you have in your mind for conducting the referral program. For example, your goals can be getting more qualified individuals into your company, reducing the hiring cost to a certain percentage, or increasing the number of applicants for a certain position. List down the goals and allocate hiring resources that work towards achieving them.
Create a Fascinating Offer
There are different categories of referral bonuses, financial, social, and altruistic, to choose from when designing a referral program. Create an offer that will tempt them the most, based on your organization’s needs and the type of employees you majorly have. This will motivate them to approach their friends to apply to the company, becoming one of the most crucial factors in determining the program’s success rate.
Keep Everyone in Loop
To ensure there is no confusion left in the back of any employee’s mind, keep everyone in the loop of the guidelines and the conditions. Be transparent about the process and answer their questions when needed. This includes the referral bonus structure as well. If you have decided on a certain reward, make sure the employees know about it and understand the structure in which you are going to follow it.
Track the Outcomes
Ultimately, tracking the results of the hard work and effort you put into crafting a well-planned strategy is important. An Applicant Tracking System can be a major help for you. This software is best to streamline your recruitment process and track the success of your hiring strategies.
Employee referrals are a great way to connect with eligible applicants while also building a strong employer brand. To upgrade your efforts, you can rely on recruiting software like Jobsoid.
Jobsoid makes it easier to find better prospects by allowing you to manage all your recruitment activities in one place. You can track employee referrals and view the various candidate sources of applications. Furthermore, this cloud-based recruiting software includes a number of features that can assist you in streamlining your hiring process.
For a pleasant recruiting experience, get started with a free Jobsoid account today!