As a job seeker, you should absolutely be aware of what an Employee Referral Program is. But, why you might ask?
It’s a simple answer. Organizations around the world are utilizing Employee Referral Programs to meet their hiring needs and paying internal employees big time cash bonuses to refer friends and former colleagues to meet open headcount requirements.
Rather than spending anywhere from $10,000-$30,000 for external recruiting agency fees (on each hire!) or exhausting corporate recruiting with difficult searches, companies are finding increased efficiency by offering cash to employees who refer their friends for interviews. Some employee referral cash bonuses might start at $100 or $500, yet some companies offer $2,000, $3,000 or even $5,000 per hired referral!
If you’re still not sure of what an employee referral program is, let’s break it down before diving into why it can be such a great tool for job seekers, and not just employers.
Employee referral is an internal recruitment method employed by organizations to identify potential candidates from their existing employees’ social networks. An employee referral scheme encourages a company’s existing employees to select and recruit the suitable candidates from their social networks.
As a reward, the employer typically pays the referring employee a referral bonus. Recruiting candidates using employee referral is widely acknowledged as being the most cost effective and efficient recruitment method to recruit candidates and as such, employers of all sizes, across all industries are trying to increase the volume of recruits through this channel. -Wikipedia
The reason that Employee Referral Programs have grown so rapidly in recent years is because some of the statistical data supporting it’s effectiveness. Simply put, it’s a cheaper and more successful way for companies to hire new employees.
In a brief summary below from Oracle’s “The Shortest Path to Better Hires: Best Practices for Employee Referral Programs”, the enterprise software giant reveals some incredible statistics on ERPs.
To understand the value of referrals, consider the following:
• On average, it takes just 10.4 referrals to lead to a hire.
• Referrals account for anywhere from 24 percent to one-third of all hires in typical companies.
• By launching an effective ERP, Vistaprint increased referrals from 19 percent to 42 percent of its
total hires in one year.4
• Some companies make as many as 75 percent of their placements through referrals.
• Referral hires perform 3 percent to 15 percent better than hires from other sources.
• Referral candidates accept offers 15 percent more often than regular candidates.
• A Workforce Management and Ohio State University study found that candidates hired through an
employee referral had a 25 percent higher retention rate than those hired through other means.
• Referral candidates perform better than candidates from other sources. When online services
provider Hinda Incentives launched an ERP, it garnered 22 referrals and made 15 hires. The
company not only saved US$36,000 in hiring fees but also enjoyed a retention rate of 93 percent
among its hired referrals.
Why does an Employee Referral Program matter to you?
Generally speaking, companies put more weight and trust in a resume that was submitted via an employee referral, than they do via a standard online application. As indicated in the Oracle research, some companies have found so much success using Employee Referral Programs that they’ve sourced 75% of their employees through such programs.
When you’re stepping into the job market, one of the first things you should do is reach out to friends in your network that work with companies you might be interested in and discuss the potential for a referral.
Check your LinkedIn connections and find a potential list of companies you’d be interested in working at. You can reach out directly to your connections via LinkedIn, or if you’re on a more personal level, give them a call and express interest in a job posting at their company.
If you’re able to procure an employee referral to a company you’re interested in working at, not only are you interested in succeeding during the interview process, usually your friend is too!
At two of the large technology companies I’ve worked at, there has been a referral bonus of $2,500 per employee and a referral bonus of $3,000 per employee. That’s a pretty large financial incentive to be an advocate for your referral and make sure they’re succeeding during the interview process.
Of course, I personally would never refer someone I know, simply for the chance of a referral bonus. It should always be a case where both the job candidate and the referring employee are confident in the fit of the position and chances for a positive interview experience.
Employee Referral Program is a Win, Win, Win
When you’re on the job market and actively seeking the next step in your career, I would recommend taking advantage of the weight companies are placing in Employee Referral Programs.
In my eyes, ERPs can be a Win, Win, Win.
Referral (Job Candidate) – Win – You get a new job at a company you’re excited about working for
Referring Employee – Win – You get a cash bonus and the great feeling of helping a friend in their career
Employer – Win – You’ve found a new employee through a cost-effective and high success rated method
Hopefully this explanation of Employee Referral Programs and tips surrounding them can be of great use to you in your career.
If anything, you should never be afraid to reach out to friends, former colleagues and your overall network to inquire about referrals because there is a good chance their company has financial incentives in place for them to refer you. When the situation is a Win, Win, Win, you’re in a great spot to succeed.