How To Set Up An Employee Referral Program

Employee referral programs are a great way to attract high quality candidates to your company. Not only do employee referrals help you find better candidates, statistics show that candidates that are referred also have better retention rates.

A lot of companies have great success with referral programs, and for good reason. A referral is a great way to start a relationship. It makes your job as a recruiter that much easier. You get to know a bit about the candidate, the candidate too—in most cases—knows about you. You are more likely to get a positive response than perhaps any other channel.

Employee referral programs are also cost-effective and easy to set up. You don't really have too much to do: most modern applicant tracking systems can help you get it all set up within minutes. Even if you aren't using any such software, you can set up a process that your company can follow every time there's a new opening.

Broadly, there are three parts to setting up an employee referral program.

First, you need to have a system to let your company (i.e. your employees) know when you have a job opening. That could be as simple as sending them a group email (or dropping a Slack message!) with the details of the new opening.

A good job description is always helpful, in this case not only for candidates but also your own team. When your employees understand the role well, they are able to make high quality recommendations. So, the first thing to take care of is a good, detailed job description that lists all the qualities you want (and all that you don't).

If you're rolling out an employee referral program from scratch, it might be a good idea to put together a document with all the details that sells the idea and make sure that the entire company is aware. Referral programs need awareness and adoption, so it’s incredibly important that you have a strategy in mind. Throwing something out there without adequate preparation will most likely just get a lukewarm response at best.

Second, you need a way for your team to actually refer candidates, track their progress, and for you to track employee referrals all in one place. As I mentioned above, an ATS can be really helpful, but even if you don't have one, a simple spreadsheet should be sufficient.

It's important to keep employees who refer other candidates in the loop. Let them know the status of their referrals (when it makes sense). Even if you don't end up hiring a referral, it's important to thank the people who are sending these referrals your way. It’s even better if you can send them a small gift for referring someone.

You can also look for other companies’ referral programs to explore some ideas. For example, DigitalOcean pays a $3500 referral bonus and a $1500 donation to a charity of the referrer’s choice. Google’s employee referral strategy is even more interesting and has a lot of lessons applicable to even smaller businesses.

Third, you need a system to reward people who refer great candidates that eventually end up being hired. You should make sure you leave a personal note for starters. It's also great if you can publicly appreciate their referral.

Besides that, you should also consider offering a monetary reward to your best referrers. Money is always a good incentive but if you don't want to do that, there are other options as well. You can get them a gift card, a trip to a foreign country, or anything else that makes them happy. For these things, you can also partner with other companies depending on your size. Keep in mind though that the goal is to make the people who refer candidates feel happy, so you should do what is both ideal for you and appropriate for them.

Once you have an employee referral program running, it's important to review it and make improvements on a regular basis. Take a look at how many referrals you are generating and how many are getting hired. Find out what your team feels about it. An easy way would to get your team’s feedback would be to quickly survey your team. There are tools that can help with this, but a simple form software (Google Forms, for example) can do the job for you.

Employee referral programs may sound daunting but they aren't. In fact, a good referral program can give you a great return for the time (and money!) you invest, perhaps better than any other channel.