9 Solid Reasons for Developing an Employee Referral Program

As we mentioned in a previous post on employee referral programs, employee referrals are statistically the top source of hire in the United States. 

So whether you have not yet started your program or you’re looking for ways to improve your employee referrals, this piece is written for you.

Image credit: Deposit Photos

Image credit: Deposit Photos


In this post, you will learn 9 proven reasons for developing your program, all of which will build your candidate pool into a larger network of great candidates. 

1. Increase quality of hire

The top reason employers develop an employee referral program is to increase their quality of hires. Ninety-three percent of employers surveyed listed "increase quality" of hires as a top reason for having an ERP.

2. Save company time 

Employee referrals took a 48 percent lower time to fill compared to other sources:

  • 28 days (the average to fill positions from referrals)
  • 54 days (the average to fill positions from other sources)

Among those surveyed, 58 percent listed "decrease time to hire" as as a top reason for having an employee referral program.

3. Save company money

The cost to hire is 58 percent lower with employee referral hires among survey participants:

  • $1554 on average
  • Instead of the average of $3704 from other hiring sources

4. Broaden your reach

The top sources of non-employee referrals for companies who have a formal program

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

5. Increase effectiveness of the hiring process

A job seeker who came in as a referral is at least three times more likely http://www.careerxroads.com/news/2014_SourceOfHire.pdf than someone without a referral to be hired.

6. Retain employees more effectively

Among those surveyed, 49 percent listed "increase retention" as as a top reason for having an employee referral program.

Of hires made from referrals, 46 percent stayed for three years or more, while employees who come from job boards stayed for three years or more.

7. Increase company revenue

Hires from referrals can produce 25 percent more profit than hires from other sources. 

8. Diversify company workforce

Among those surveyed, 32 percent listed "increase diversity" as as a top reason for having an employee referral program. An old myth is that referrals *do not make* a more diverse workforce, but the opposite is true, according to Dr. John Sullivan. In fact, he says, employee referrals are the "'most productive' source for diversity hires."

9. Cultivate great company culture

When company's source hires from employee referrals, they will naturally cultivate consistent company culture. While the workforce itself might become more diverse with each new hire from employee referrals, the employee who refers a friend already likes their job, so they are likely to communicate well what the company culture is like. In this way, logic dictates that turn-over is less likely with referrals.

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