Employee Referral Programs for Small Businesses

As small businesses compete for talent, often with fewer recruiting resources than larger organizations, employee referral programs can offer another way to identify qualified candidates.

Referral programs are generally successful because employees consider possible referrals carefully since they feel accountable to the organization and the person they refer. Additionally, high performers tend to refer other high performers, which benefits employers. This post explores the benefits of referral programs for small businesses and strategies for creating and maintaining successful programs.

Employee Referral Program Benefits

Employee referral programs allow existing employees to recommend candidates for open positions. Current employees can provide information about the company to referred candidates, giving them a good idea of what working for the organization would be like before they are called in for an interview.

In this aspect, referral programs can help save HR professionals, hiring managers, and the organization time and money. Because employees understand the organization and know the people they refer, referrals can help employers identify candidates who may be a strong fit. Employee referrals can also shorten the hiring process, potentially reducing recruiting costs and the internal resources required to fill an open position.

Strategies for Small Businesses

An effective employee referral program can save small businesses time, money and other resources during hiring. It can also help support an organization’s reputation as an employer. Employers can consider the following strategies for establishing and maintaining such programs:

• Make submitting referrals easy. Clear communication is necessary so that employees know how to submit referrals. This process should be simple, allowing employees to send a resume, provide an email and phone number, or submit a standard form to start the referral process.
• Incentivize employee referrals. To enhance the appeal of referring friends and family to the company, employers may provide monetary rewards, paid time off or other gifts to current employees who refer quality candidates for open jobs. Employers offering referral bonuses or other incentives should also consider applicable payroll, tax and wage-and-hour requirements.
• Keep the program inclusive. Employee referrals should complement, rather than replace, broader recruiting efforts. Employers should continue advertising positions through diverse recruiting channels and apply consistent, job-related selection criteria to referred and non-referred candidates alike.
• Leverage technology. Small businesses may be short on staff, but technology can help manage programs and automate referral processes.
• Keep employees informed. Employers should keep employees in the loop about the status of their referrals to avoid frustration and increase transparency.
• Acknowledge good referrers. Public recognition can go a long way with employees, so small businesses should consider awards or public praise to let employees know they appreciate their effort in sending referrals.

Final Thought: Think Beyond Employees for Referrals

Referral programs don’t need to rely solely on employee referrals. Companies can also open referral opportunities to additional stakeholders, such as retirees, customers and business partners.

Employee referral programs can be an effective strategy for attracting and retaining talent and hiring workers faster.

The above information does not constitute advice. Always contact your employee benefits broker or trusted advisor for insurance-related questions.