The Role of Employee Referrals in the Hiring Process

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The Role of Employee Referrals in the Hiring Process

Role of Employee Referrals in the Hiring Process
HireME15 Feb 2023Share this

Employee referrals, the term in recruitment means an endorsement provided by an employee of an organization towards a friend who is looking either actively or passively for a job offer. Employee referrals are crucial and employer referral programs are a rising trend in modern times. In fact, 30% of companies are planning to invest more in referrals.

The Reason?

It is because employee referrals produce significant output.  It is a great way to find top talent in a jiffy without having to look hard enough. This insightful article explores the importance of employee referrals, the role of employee referrals in hiring, and some relevant important statistics.

Before we move on to that, let us understand “what are employee referrals?”

What are Employee Eeferrals?

  • Employee referrals are a structured program where employees of a particular organization are asked to refer candidates for hire.
  • The candidates thus recommended by the employees are known as employee referrals.
  • These referrals may either come from an employee or a client.
  • When employee referrals are made, the recruitment process does not follow the traditional structure.
  • In this methodology of recruitment, the employee submits the resume of the referral to the company.
  • So, sourcing and resume parsing which are the first two steps in recruitment is skipped.
  • Based on the resume and further evaluation, the company then decides whether or not to proceed with the candidate.

What is the Importance of Employee Referrals?

  • The recruitment process is changing.
  • Recruiters are trying out innovative and unique ways to find the top talent for their organization.
  • An employee referral is a part and parcel of such creative ways.
  • It is also difficult to find true talent amidst the vast number of candidates that apply every day.
  • In this situation, embracing help can be the only way out and the option of employee referrals is an easy aid offered by internal employees.
  • Employee referrals are important because they supply the organization with quality hires in the shortest period.
  • It is because of such reasons that employee referrals have become one of the best ways of sourcing.

What is an Employee Referral Program?

  • An employee referral program is a more organized way of sourcing employee referrals.
  • The question is why introduce an employee referral program rather than an ordinary employee referral?
  • An ordinary employee referral will provide you with candidate references no doubt but it is effective for short-term recruitment.
  • If you are seeking long-term recruitment and a more organized way of sourcing employee referrals, then comprehensive employee referral programs are the best.

What is the Role of an Employee Referral In the Hiring Process?

Improves Quality of Hire

  • Your current employees are already familiar with your work culture, mission, and vision.
  • So, it will be easier to introduce your company to the referrals.
  • In addition, the referrals are also free to ask as many questions as they can and get clarified on the matter.
  • Employees also target passive candidates who are not actively on a hunt for a job.
  • Since it is often the passive candidates who are the best ones, the quality of your hire naturally improves.

Reduces Time and Cost to Hire

  • Your employee referrals are suggestions made to you by an employee in your organization.
  • The references are mainly made by submitting a resume.
  • So, you are saved from the dual tasks of sourcing and parsing through resumes to find the right candidate.
  • Just a reference and you are done with the initial steps in recruitment.
  • This saves a lot of time thereby reducing the time to hire.
  • Since time is money, reduced time to hire also brings about the reduced cost to hire.
  • Thus, a reduction in both time and cost brings a lot of profit to the company and also makes the recruitment process more efficient and effective.

Greater Retention of Employees

  • Employee referrals are generally quality hires since the employee making references are familiar with their contact’s qualifications, work experiences, etc.
  • The higher the quality of the candidate, the better they are going to stick with the organization.
  • Therefore, it is crucial to find the right talent which can be supplied through employee referrals.
  • On the other hand, candidates who are not the right fit for the company will leave the company sooner.
  • Candidates who are recruited through online job portals have access to the company information through the website or the job description.
  • However, employee referrals are in direct contact with someone who is currently working in the company and who will be better able to provide a peek into the working culture and the environment.

Establishes Employer Brand Image

  • An employer builds his brand through advertisements in different social channels or through the website.
  • Employees can also project the employer’s brand through word of mouth.
  • This is also regarded as one of the best ways to establish a good employer image in the eyes of the candidate.
  • Since a candidate would trust their contacts well rather than words coming from a CEO or advertisements, there are higher chances that the candidate will be interested in the role offered.
  • Thus, employee referrals play a pivotal role in building a brand image.

What are Some Employee Referral Statistics?

The employee referral strategy is quite useful and productive for the hiring process. There are statistics throwing light on the evidence that proves that employee referral is a great way to source candidates.

Let us have a look at some of these:

Employee referrals speed up the hiring process by 55% as per data by HR Technologist (also stated in Economic Times).

As per, an employee referral program can save around $3000 per hire.

As stated in Economic Times, 82% of employees consider employee referrals as the best source to generate an ROI (Return on Investment).

John Sullivan conducted a survey and found that 88% of companies consider employee referrals to be the top source for hiring true talent.

How to Build an Effective Employee Referral Program?

To build an effective employee referral program, you must incorporate it with other recruiting strategies.

Let us see how we may create an employee referral program that would source only the top talent to our organization:

Know When to Incorporate Employee Referrals

  • Ask certain questions before you embark on an employee referral program.

These questions may include:

  • Should I start with referrals right at the onset or after publishing the job ads?
  • Which position(s) should I fill in with an employee referral(s)?

These questions will help you settle on answers portraying the goals of recruitment.

If you want to speed up the recruitment process, go for employee referrals first, and later you may publish job advertisements.

If a representative position has been vacant for a long time, you might need to prioritize it first and go for an employee referral program.

Switch When Struggling to Find Good Candidates

  • You may have tried and applied various recruitment strategies to get an influx of candidates for the vacant positions in your company but are at a loss as good candidates are not filtering in.
  • Since you are in a struggle to find good candidates for the position, you should consider going for an employee referral program.
  • Also, if you are worried about the retention rate of employees in your company, go for referrals.
  • Delaying will only produce more troubles that will impact the organization negatively.
  • Above all, you must switch to an employee referral program when it’s time.

Introduce Greater Clarity in the Employee Referral Process

  • For your coworkers to be an integral part of the recruitment process, you must be transparent about the way everything works.
  • You must provide them with the necessary information and make the entire submission process easier.
  • The information you need to share with them may include the job title, requirements, skills, work experience, etc.
  • Once there is enough clarity into a referral program, your coworkers will be quick to respond.
  • Once you are getting recommendations in your inbox, it’s time to evaluate them but first, let them know that you found their profile through a mutual contact.
  • For this, you will be following the intermediate and final steps of recruitment, i.e., from interviewing to onboarding (if the candidate gets selected).

Motivate Employees Through Exciting Incentives

  • There may be several reasons why an employee referral program might not be working out.
  • Some such reasons may be the employees being busy with work, a lack of interest, or procrastinating with the initiative.
  • What should be done in such a case?
  • The answer is incentives.
  • Incentives must be introduced to make the employees feel motivated and rewarded.
  • Incentives may be of different types
  • A word or showcase of praise
  • Employee referral bonus
  • Event tickets, gift cards, free leaves, etc

Incentives are often seen to boost the employee referral program as more qualified candidates are seen submitting their resumes.

Evaluating Employee Referrals Through HR Metrics

Comparing the Number of Hired Referrals to the Number of Total Referrals

  • After you have gone through your employee referral program, it is time to evaluate the weaknesses and strengths of your program with the help of HR metrics:
  • You need to compare the number of total referrals to the number of hired referrals.
  • If you find that the number of hired referrals is way lower than the former, you need to make changes or reinvent your employee referral program.
  • Try to understand what went wrong and how can you work to improve it.
  • Reassess employees’ motivations for providing you with such a list of candidates.
  • If you have not introduced enough incentives, try upgrading that.

Existence of a Deeper Issue

  • If you see that employees are hesitant to suggest their contacts to your organizations, it may hint towards a deeper problem.
  • Maybe they are not happy with the work culture, the work environment, or the work itself.
  • It also may be that they are afraid of competition and have fear of being replaced.
  • Such problems need to be sorted out by highlighting to the employees how they are an integral part of the company whose success depends on it.
  • They must be further motivated so that they participate in employee referral programs.


How Employee Referral Tools can Streamline the Recruitment process?

We understood the role of employee referrals in hiring, now let us have a look into the features of a hiring tool:

Employee referral tools or employee referral software guides HR professionals, recruiters, and hiring managers to oversee an employee referral program.

It is a platform in recruitment management software where employees can recommend their friends for the job positions available, leverage the networks and participate in hiring campaigns.

It boosts employee engagement by incorporating incentives in the form of bonuses, helping them become brand ambassadors.

With new and innovative methods of recruitment being introduced, companies are opting for employee referral tools in the talent acquisition software.

In 2019, 58% of organizations opted for employee referral tools.

HireME’s employee referral tool is an excellent way for businesses to get the right recommendations or references from their workers.

It is a cost-effective solution that also saves time and resources.

Plus, HireME as a recruitment management software has Applicant Tracker System, Artificial Intelligence, and machine learning that makes the hiring system provide a top-notch performance.

Click on HireME’s Employee Referral Tool to tap into the talent network via an Employee Referral program.

Frequently Asked Questions (FAQs)

What is the role of referrals?

In terms of recruitment, the role of referrals is an endorsement provided by an employee or a client towards a contact for an organization.

What are the benefits of employee referrals?

The benefits of employee referrals are numerous:

  • Reduces time and cost to hire.
  • Builds employer brand image.
  • Helps in employee retention.
  • Improves quality of hire.

Does employee referral affect recruitment?

Yes, employee referral has a big say in recruitment. Employee referrals speed up the recruitment process by 55% as per data by HR Technologist (Economic Times).

What is the goal of a referral program?

The goal of a referral program is to source candidates through employee referrals.

What is the impact of the employee referral program?

The impact of an employee referral program is that it streamlines the recruitment process through internal sourcing.