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Small Business

Employee Referral Programs for Small Businesses

September 12, 2023

As small businesses compete amid ongoing talent shortages, often with fewer resources than large companies, they may need to get creative in their attraction and hiring efforts. As such, employee referral programs are growing as a popular strategy.

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 candidates a good idea of what working for the organization would be like before being called in for an interview.

In this aspect, referral programs can help save HR professionals, hiring managers and the organization time and money; since the employee knows both the company and the person they refer, this typically leads to a good match for the employer and new employee. Referral programs can reduce hiring time by half compared to traditional hiring methods. Further, since referred employees are faster to hire, organizations save money on internal labor costs or outsourcing.

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.
  • 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 to attract and retain talent and hire workers faster.

Related Reading: How Small Businesses Can Address Talent Shortages

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

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