Drafted Surveyed 200+ Companies About Their Employee Referral Programs. Here’s What We Learned.

Want help with your hiring? It's easy. Enter your information below, and we'll quickly reach out to discuss your hiring needs.

It’s common knowledge that employee referrals are a gold mine when you’re looking to make great hires quickly. But creating, managing, or scaling a successful referral program takes some tactical effort, and there’s not a lot of information out there about exactly what to do and where to start. That leads to a lot of frequently asked but rarely answered questions, like:

• Shouldn’t employees refer their friends because they like it here? Why do we need a referral bonus?
• Will a crazy reward like a trip to Hawaii get us more referrals?
• How much do we need to budget for referral bonuses?
• Will a $20,000 reward get us more referrals than a $2,000 reward?
• How does an applicant tracking system (ATS) affect our referral program?
• How do we keep employees engaged and get them to leverage their networks better?

To help finally answer some of these questions, we at Drafted surveyed more than 200 companies to create the 2020 Employee Referral Program Benchmark Report. After compiling and analyzing the data, here’s what we found:

Insight No. 1: When it comes to referrals and rewards, there is a sweet spot for getting the most bang for your buck.

More than 80 percent of the companies we surveyed offered cold, hard cash rewards for a successful hire, with a median referral reward amount of $2,000. Based on our analysis of the data, companies that offered referral bonuses between $3,000 and $5,000 per successful hire had the most efficient spend based on the average amount of hires made from referrals.

Insight No. 2: ‘Hot job’ bonuses are becoming the standard.

Fifty percent of companies offering a referral bonus are also offering “hot jobs” bonuses — essentially, increased rewards for priority roles. The majority of hot job bonuses focus on tech and engineering roles, with additional incentives for senior positions. The most popular maximum bonus was $5,000, with the highest bonus reported being $30,000.

Insight No. 3: More companies are beginning to experiment with external referral rewards.

We found that 25 percent of organizations are either experimenting with or already offering external referral rewards. This is much higher than our last employee referral report in 2017, in which only 8 percent of companies reported offering external rewards.

Typically, companies that use external rewards to drive referrals offer lower reward amounts or non-cash prizes of lesser value than their employee rewards. The reduced rewards are largely a response to lower conversion rates for external referrals or for the sake of simplicity in managing payouts and tax implications in various geographies.

Insight No. 4: Your ATS is not going to make or break your employee referral program.

To understand the effect of an ATS on a referral program, we looked at the percentage of hires made through referrals across small, midsize, and large organizations. For example, if you hire 10 people in a year and three of them come through referrals, your referral hire percentage is 30 percent.

We found that the median across all sizes, regardless of ATS, fell into the 25-30 percent range.

Insight No. 5: Employee referral programs produce fairly consistent results regardless of company size.

We found that all companies, independent of size, reported more than 20 percent of their hires came from referrals. The median percentage of hires through referrals was 27 percent, and the best in class was 44 percent.

Hopefully, you can use these metrics to benchmark how your referral program is performing — or get ideas for how to get your referral program off the ground.

Cait MacBrien leads marketing a Drafted.

Read more in Employee Referral

Cait MacBrien leads marketing a Drafted. Drafted powers best-in-class referral programs at companies from seed-stage startups to large enterprises.