8 Great Ways to Develop an Employee Referral

How to develop an employee referral program

Chad Harrington

One report reveals that 75 percent of participating organizations have an automated or semi-automated way to manage their employee referral program (ERP). That means they use outside tools and that one out of four companies surveyed have a manual process.

Image credit: Deposit Photos

Image credit: Deposit Photos


So for those who have not yet developed an ERP or who want to make theirs better, here are eight top ways to develop your ERP:

1. Incentivize with Cash

Of companies surveyed, 34 percent incentivize their employees with monetary rewards. Cash is the most common incentive among major US corporations surveyed.

How much money is appropriate, though? Companies with a formal referral program paid employees these amounts per hire:

  • < $1000 (26 percent of companies paid this as an average per referral hire)
  • = $1000-$4999 (69 percent of companies)
  • > $5000 (2 percent)

2. Use Non-cash Incentives

Most companies, according to one report, incentivize with both cash and non-cash rewards (40 percent of companies), and some use only non-cash incentives (17 percent). 

Consider top ways major corporations around the world incentivize without spending cash:

Top non-cash incentives are: 

  1. Prize drawings
  2. Coupons, gift cards, and award points
  3. Company logo items
  4. Vacation days

Other popular non-cash rewards include:

  • Gift vouchers
  • Gizmos (e.g., tablets)
  • Movie tickets
  • Passes to popular concerts

3. Implement “Gamification”

Everybody likes a game whether you’re an adult or child, so use this human need to play by implementing games for your employee referral program. 

Up to 70 percent of large companies use some form of gamification in the work place—companies like IBM and Deloitte.

"Gamification”—when used with regard to an employee referral program—is, “The use of game mechanics to encourage engagement and instantly recognize the efforts of employees who proactively participate in the recruiting process.”

Make at least part of your employee referral program a game. It’s proven to work. 

For example, you can give points for every candidate lead and keep track of who has the most leads on a leaders board. Then, when a candidate from an employee referral is successfully hired, the employee who referred the new employee can move up the leaderboard and get extra points. Those who get the most points can be rewarded richly with cash or non-cash incentives.

The competition itself builds momentum before the hires are even made. This is a great way of finding new candidates and having fun, too.

4. Communicate Clearly

Employees complain about clear communication from their executive team. Most of us could be clearer regarding our ERP, as well as employer branding. Here's how you can measure your clarity on your referral program. Ask:

  • How many of your employees have never referred a job candidate?
  • How many employees can clearly articulate how your employee referral program works?
  • How many hires do you make from referrals each year? Compare your company's stats to other US company statistics.

Bonus reading material: “How to Craft a Clear Employer Brand”

5. Conduct a Company-wide Survey

This is something you can do fairly quickly through Survey Monkey or JotForm. Start by asking your employees:

  1. Have you ever referred a friend for a job working for this company? [Give them a Yes/No choice]
  2. What is our company's referral rewards program? [Create a fill-in-the-blank]
  3. How can we help you more easily refer people in your network? [Create a fill-in-the-blank]

Clear communication is an art. Make your process simple. Then, over time relay your simple messaging to your teams. Consistently remind your employees exactly how to do it and what rewards they will get. Clarity is more about consistent communication than about anything else.

6. Invest Money into Your Program

Your more likely to see an ROI on money invested into a referral program than other hiring investments, because it causes a ripple effect of savings. Employee referrals are the most effective source of great candidates, so your investment here will compound as your program grows.

7. Tap into Non-employee Referrals

Referrals are not limited to those whom your employees refer. As Meritage's "Employee Referral Trends Report" revealed, engaging non-employees for referrals is becoming increasingly popular and effective for making great hires. That was trend number two of their survey. 

Therefore, employers should consider how to leverage second-level connections for their referral program. The top sources of non-employee referrals for companies who have a formal program are: 

  1. Alumni (70 percent of companies include individuals from alumni as referral sources)
  2. Customers (48 percent)
  3. Social Media Connections (48 percent)
  4. Vendors (35 percent)

8. Retool Your Program with Modern Technology 

Most companies surveyed are somewhat dissatisfied or neutral about their current referral tool. 

Be different and use modern tools to manage your referral program. There's a whole gamut of tools out there, and companies use all of them:

  • 50 percent of companies with a referral program use an ATS to manage referral
  • 14 percent use a non-ATS third party solution

Did we leave anything out that should be included on the list? Drop us a line.