What Does Employee Referral Mean?

Only refer a friend if he is truly qualified for a position.
Only refer a friend if he is truly qualified for a position. (Image: Jupiterimages/Photos.com/Getty Images)

Businesses have a number of strategies when it comes to recruiting and hiring new employees. Managers might post the job listing in a newspaper or online or reach out to their professional networks to find the ideal candidate who is available or looking for a new job. Some companies also use employee referrals as a way to find job candidates. A current employee suggests or refers a friend or colleague for an available job.

How It Works

When a job opens up at a company, many managers or hiring staff ask current employees if they know of anyone looking for a job who has the appropriate qualifications. The hiring staff essentially allows current employees do the recruiting work to help increase the number of candidates for the available job. Employees then ask their friends, family members or people in their professional or social networks if anyone is interested in interviewing or learning more about the job.


Many companies establish an employee referral program. It offers rewards or incentives to current employees to help find the right candidate. For example, a company might offer a bonus to whoever refers a hired candidate. This gives employees more incentive to take the time to refer the right people for the job. The bonus or incentive may be paid in two parts, the first half upon hiring and the second half after the candidate has been in the position for a certain length of time.

Choice of Candidates

Employees must recognize that their choice of candidates can reflect on their judgment, either positively or negatively. Therefore, an employee should not refer anyone unless that person is truly qualified. She also should not refer anyone with whom she does not get along. If her candidate gets the job, she may have to work with him every day. If someone comes to an interview on an employee's referral and acts inappropriately or clearly is a bad fit, a manager might be displeased and it can affect the employee's reputation negatively.

Benefits of Employee Referral Programs

Implementing an employee referral program has a number of benefits. Employees act as recruiters, which is advantageous because they understand how the company works and can explain the nature of the industry and work to potential candidates. This helps weed out people who might be on the fence or are unsure of what the work entails. Also, it motivates employees to help create teams that work well together. Employees are more invested in their work when they can interact with people they respect, which in turn is good for productivity. Employee referral programs also empower employees and make them feel as if they have more of a say in who gets hired at the company, which is also good for morale.

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