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Are 1/3 of Your Jobs Filled by Employee Referrals?

Colleagues laugh together over a cup of coffee

Outside recruiters are essential for certain job openings and situations but, for at least one-third of hires, the best place to start for a high-quality candidate pool is with employee referrals. In fact, The HT Group itself has both employee and temp/technical contractor referral programs in place. And we’re not alone. Employee referrals continue to be the top source of hires for U.S. employers, delivering more than 30 percent of all hires in recent years.

“In my experience, employees are more likely to refer individuals who are not looking at job ads or seeking a job. These passive candidates are hard to reach otherwise,” says The HT Group Director of Operations David Dole. With record unemployment rates holding steady, finding passive candidates has never been more critical.

The type of candidates top employees bring in is also ideal because there’s pressure on them to refer the right people. One study shows referred candidates are 3-4 times more likely to be hired than non-referred candidates. And new hires found through referral programs tend to produce 25 percent more profit than hires sourced in other ways.

“Your top employees are likely to suggest other top-performing candidates,” Dole explains.

“These referring employees want to be regarded well by the quality of their referrals, so they’ll have done the work of finding the ‘right’ candidate for you. No one wants to be associated with a referred candidate who failed to achieve or contribute to the company.”

Employee referral programs with financial rewards are popular because they provide incentive. A study by WorldatWork found 63% of companies offer some sort of monetary-based referral program. The HT Group’s monetary incentives for employee referrals increase the longer the referred employee stays on board, up to a year. Tiering incentives in this way ensures more reward for higher quality referrals.

Some companies incentivize in other ways. Gift cards, charity donations and extra PTO days are often used. And opening a referral program to include company alumni, clients and vendors can be beneficial, too. Anyone who has a stake in the success of your company could be your next great referral source. They may just need a compelling reason and an easy process to accomplish it.
Use this SHRM guide to help you think through your referral process. At its very core, your referral program should:

  1. Put employees and stakeholders first. Too often, employees are the last to know about open positions because they just aren’t being communicated to effectively.
  2. Make referring easy. Don’t ask for information you won’t need, make the submission process complicated or not mobile-friendly, or include unnecessary eligibility requirements.
  3. Offer incentives employees value. As we outlined above, there are many ways to reward employees for high-quality referrals, but not all rewards are right for your work culture. Find out what your employees value and go from there.

When Dell revamped its referral program to follow these principles better, the company experienced an increase of up to 125 percent in global referral hires and a 20% overall decrease in cost-per-hire.

Some companies find success automating the process with employee referral software. Austin-based ROIKOI is one such software solution, which claims to identify the top 7% of employee connections right for the job via a simple interface, without the employees lifting a finger. You can then request introductions or get looped into employee-initiated conversations. It could be that extra nudge employees need to actively participate in the process which, in turn, keeps them engaged.