How to Create an Employee Referral Program

Formal employee referral programs have a number of benefits, both financial and environmental. The cost of hiring a referral is much less than the fee that a headhunter might charge, and the likelihood is greater that the employee will be a good cultural fit. A referral program allows current employees to feel a sense of pride and ownership, according to the website TechRepublic.com. New employees feel like they have an existing support network. The result is a win-win situation.

Instructions

1. Determine the best program fit for your organization. Smaller organizations benefit from a casual approach, while larger companies need to involve human resources and other departments. According to TechRepublic.com, consider your culture, recruiting budget and goals. ERE.net recommends having one employee referral program manager to administer tasks, rather than a committee.

2. Develop program rules. A successful referral should result in compensation for the employee. The amount of compensation may be fixed or variable, depending on the level of the hire. Difficult-to-fill positions can have an additional bonus attached. The employee with the most annual referrals can be eligible for a special incentive. Bonuses are usually paid as part of wages.

3. Post job descriptions. The company intranet is an effective place to list available positions. Otherwise, email is acceptable. List available positions in a break room, near the water cooler or in any place that is heavily visited. In the posting, include instructions for how an employee should proceed if she knows a candidate. For example, a link can be included on the job posting that allows an employee to "refer a friend," according to TechRepublic.com.

4. Award job retention bonuses. If the referral builds a successful career at the company, award the employee a bonus after a specified period of time -- after 2 years, for example.

References

• TechRepublic; How My Company Created a Successful Employee Referral Program; Kerri Koss Morehart; February 20, 2001
• American Management Association; If You Want a More Successful Employee Referral Program,Think Experience; October 2, 2007
• Ere.net; Making Your Employee Referral Program Work Smarter -- Follow Up Questions and Answers, Part 2; John Sullivan; June 28, 2010