Why You Should Have an Employee Referral Program

One of the fundamentals of having a successful business in any industry is to have a team of qualified employees. However, looking for the right people to hire can take a toll on your resources. This is especially difficult for startups and small-scale businesses since many of them go unnoticed by job seekers who mostly have their sights set on bigger companies. If you’re having problems looking for people to hire, an employee referral program might be a viable option for your company.

Employee Referral Program in a Nutshell

An employee referral programer ERP is a hiring strategy that heavily involves the people already working for your company. With this kind of strategy, your employees are encouraged to recommend people that they think will be qualified enough for the positions that need to be filled. If a recommended person is hired by your company, the employee who referred that person receives an incentive.

An ERP almost always uses cash incentives to reward employees and keep them engaged in looking for people to refer to your company. To keep the system from being abused, the program may have certain conditions that prevent an employee from “gaming the system.” A common example would be rewarding employees with successful referrals only if the recommended person has passed probationary status or have worked for the employer for three months after the date of hiring.

Benefits of Employee Referral Program

At first glance, paying your employees to look for people to hire even when you have a full HR staff may seem like a waste of resources, but an ERP provides plenty of advantages that any business can capitalize on.

  1. More quality hires – One of the biggest problems with conventional hiring strategies is that there’s no way to see if a person is fit for the job. On the other hand, employees who participate in an ERP are more likely to refer individuals with a similar work ethic to theirs. This means your company would have an easier time evaluating a person and spend fewer resources sifting through resumes that would likely yield no results.
  2. New hires adjust faster – Employees always refer individuals that they personally know, usually as friends or former colleagues. This may not seem like much but since people hired through an ERP starts work with someone they are already familiar with, they would have an easier time getting comfortable with their job position and your company’s culture—a very important aspect in an environment where teamwork is essential.
  3. New hires tend to stay – People hired through an ERP don’t just adjust faster, they also tend to stick around longer. This is because most people prefer working in job positions that they are already comfortable with. There’s also the fact that they were recommended by their friend or colleague so they tend to view the referral as a favor.
  4. It scales well – With an ERP, every employee is a potential recruiter for your company. This means the more employees you have, the more referrals you can get. This is why ERP is a viable option even in circumstances where your company expands, whereas a conventional recruitment method could fail to keep up with the sudden increase in the demand for new employees.
  5. It’s compatible with other programs – An ERP doesn’t clash with other hiring programs. This means you can keep your original hiring program AND adopt an ERP to further increase the chances of finding people worth hiring. Instead of acting as a total replacement, you can consider an ERP as an additional option for recruiting new people.

Conventional hiring programs mostly benefit you (the employer), but an ERP benefits you, your employees, and even the new hires. You’ll have an easier time looking for the right people, your employees get rewarded for it, and new hires get to start work with someone they already know.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

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