Best practices for employee referral programs

According to LinkedIn Corp.’s 2017 global recruiting trends report, 48 per cent of employers feel employee referrals are the best source of quality hires. Despite that enthusiasm, employers allocated just nine per cent of their recruitment budgets to employee referral programs.

Some employers are investing in their programs, however. In its case, Toronto-based Score Media Ventures Inc. offers a $10,000 bonus for employees who help recruit candidates for its engineering division. “It was directly related to the engineering field,” says Sally Farrell, senior vice-president of human resources.

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“The developer market is highly competitive, but we have a strong engineering team. We thought motivating our own employees to look for strong developers to work with them, as well as us, was a win-win.”

And, it has worked. Since the program’s inception two years ago, the Score has had seven referrals.

Benefits of a program

Referrals have some clear advantages. “The person being recruited already has a connection to the organization through the person referring, so there’s increased potential for engagement,” says Anne Peiris, vice-president for compensation at Accompass Inc.

Referral programs are also relatively inexpensive. “Going to external recruiters can be quite costly, depending on how you do it,” says Eileen Dooley, vice-president of VF Career Management.

Even non-cash incentives can work well, too. “I’ve seen companies offer a few extra days’ vacation or reduced hours for a week of work, something that you know would incentivize someone that wouldn’t eat into the financial budget,” says Louisa Benedicto, vice-president for the greater Toronto area at Hays Specialist Recruitment Inc.

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Still, a referral isn’t as simple as passing along a friend’s resumé. Benedicto says the referring employee has to do some due diligence. “Get the employee to have a conversation with the person they want to refer to suss out whether or not they’re interested in the company, the culture and the role,” she says.

Employees should be careful about recommending somebody, says Dooley, “not just because you know this person is nice and a good friend of yours. When you recommend somebody, especially if you’ve said you’ve personally worked with them, you’re part of that hiring decision and your reputation is going into that.”

Implementing a program

For employers thinking of starting a bonus program or wanting to tweak their current offering, there are a number of points to keep in mind. “With referral bonuses, as with a lot of compensation-related things, there should be a clear policy around them,” says Peiris. The policy should outline who’s eligible for the bonus; which roles it applies to; the value and timing of the payout; and any other stipulations, such as who isn’t eligible to participate.

“We do break down the $10,000 to cover for making slips in judgment,” says Farrell of the Score’s program.  “After three months of employment, the person who referred will be paid the first half. And then after a year, the person who referred will receive the final $5,000.”

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It’s also useful to be clear on how long the referral program will last. “Most organizations have them for continued periods of time,” says Peiris. “But if it’s a measure to meet an immediate need, you must be clear [about] how long the referral bonus will be offered. Are you offering it for six months, 12 months, six weeks?”

And while employers may truly be struggling to find candidates, they should avoid positioning it that way when explaining the reason for implementing a program to their employees, says Benedicto.

“It should be positioned as, ‘We want to tap into your network. You know our culture. Let’s build on it and let’s get the right fit.’”

Brooke Smith is a Toronto-based freelance writer and editor.
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