Employee referral programs can be the lifeblood of the recruitment process. The quality of the candidates — as well as the retention rate — is higher for applicants recruited through employee referral programs than it is for employees recruited through other means.
Your employees know the culture in the office and what kind of work ethic it takes to perform above par at your company, and high-performing employees are likely to refer candidates that are of similar dispositions.
Traditional recruiting can cost anywhere from $4,285 to well over $18,000 per hire, and that can really add up if you have a heavy hiring season ahead of you. The knowledge that recruiting with a referral program only costs about $1,000 per hire should be a breath of fresh air.
Keep in mind, too, that referral programs don’t have to rest entirely on your employees’ shoulders. Referral programs can involve anyone close to the organization, including retirees, stakeholders, and families of current employees. On a similar note, the program doesn’t have to rest entirely on your shoulders either. Employee referral management systems offer organizations easy and streamlined ways to automate mundane operations, freeing you and your teammates to work on other matters.
For those that have employee referral programs already in place, here are some facts you may not know. For HR pros who haven’t yet implemented employee referral programs, these 10 statistics should prove as a warning sign that you’re behind the times.
1. Companies who use employee referral programs have average retention rates of 46 percent, compared to the 33 percent retention rates of organizations that only use career sites.
2. New hires obtained through employee referrals finish training and onboarding sooner than hires from other sources. This is not to mention that referred hires tend to start their jobs sooner than other hires: candidates from career sites start after 55 days; those found on job boards start after 39 days; and employee referrals start after 29 days.
3. One-third of companies planning to implement employee referral programs will use third-party software systems to manage their programs.
4. Sixty-nine percent of organizations with employee referral programs offer employees who bring in culturally and functionally qualified candidates between $1,000 and $5,000 in cash incentives.
5. As an alternative to a cash incentives, 15 percent of companies offer time off or additional vacation days.
6. Maintaining an employee referral program can become chaotic without easy automation. That’s why 75 percent of organizations use employee referral program systems that allow for automated or semi-automated processes.
7. Referral candidates are 3-4 times more likely to be hired than non-referral candidates.
8. Not all referral hires come from employees: 41 percent of referrals come from the organization’s external network.
9. New hires sourced via referral programs produce 25 percent more profit for their companies than new hires sourced via other means.
10. Referral programs can save organizations $3,000 or more per hire.
Bonus: Employee Referral Programs Can Attract Passive Candidates More Effectively
Employee referral programs have the potential to include the entire team in the recruitment process. Current employees know the organization, so they understand the job requirements and the culture, and they are more trustworthy than recruiters in the eyes of passive candidates.
Because referred employees get firsthand information about the atmosphere of the company and the workload of the job, they are better prepared to join the company than non-referred employees, which makes them more likely to stay with the organization and more productive than the average recruit. The referred employee’s “preview” of the company creates a faster onboarding process, which means that new employees start working sooner than those recruited from job boards or career sites.
Overall, an effective employee referral program saves organizations time, money, and energy throughout the hiring process. It also functions as an additional tool for team-building. Want a strong workforce and a more affordable recruiting budget? Implement an employee referral program.