Pros and Cons of an Employee Referral Program

Employee referrals are great. It validates that your company is such a positive place to work that your employees would recommend it to their friends and colleagues. But are their cons in addition to the pros? How can an employee referral program help your business and not harm it?

The Good and Bad of Employee Referral Programs

An employee referral program can actually handicap your company. If you are completely dependent on employee referrals to bring in candidates, your efforts to hire will be hampered. Or, the opposite is also true. If you have an employee referral program and none of your employees are using it, it may signal that you have some internal issues that need to be addressed.

Keep It Neutral

One thing to watch carefully is that the employee referred candidate isn’t isolated from other employees. It’s also important to establish a fair, non-partisan process for hiring the employee referral to avoid “playing favorites.” This could lead to a charge of discrimination later should a non-referred candidate feel they weren’t treated equally as the referred candidate.

At the same time, an employee referral is a known quantity in a sense. Because the employee making the referral knows your organizational culture, you won’t have to worry as much about the employee fitting in. The candidate quality will be better, so you’ll be able to speed up the hiring process. The chances are higher, too, that you will retain the referred candidate longer. This saves your company money in the long run.

Boost Morale & Reward Employees

There is an unexpected benefit of an employee referral program; it will boost morale for the employee who made the referral. It’s validating to them that you value their opinion so much you would hire based on their recommendation. The statistics show that employee referral programs provide real ROI:

Make sure your referral program is designed to reward employees appropriately. The program should be carefully outlined in writing, and your recruiting team should actively promote it. However, make certain that you also take into account any potential downfalls of a referral program so that the process remains a win/win for your organization and your employees.

Referral programs typically offer the referring employee financial or other incentives to encourage them to send new candidates to your recruiting team. That bonus can also be a morale booster for the employee, although you should be careful that the bonus is paid after a reasonable amount of time, such as 90-days after the new employee is hired. That way, your company is better protected if the new hire doesn’t work out for some reason.

Contact Us Today to Learn More

ADD STAFF works closely with our candidates to ensure they’re the perfect fit. We often receive referrals from our candidates and the clients we serve. Contact us and find out how we can help your organization meet its hiring goals.