Benefits of Employee Referral Programs: Recruiting Quality Team Members Through Friends and Families
Your frontline employees are one of your biggest competitive advantages in the post-pandemic recovery. To properly enable them, these essential employees should be well-trained, understand the processes that are in place, and have enough institutional knowledge to adapt to unexpected situations. The problem is that tenure isn’t usually a hallmark of frontline jobs, which generally see high levels of turnover.
That’s where employee referral programs come in. Among their many benefits, hires that were referred by another employee have a much lower turnover rate.
This low chance of turnover is one of the reasons why forward-looking frontline businesses are improving their employee referral programs. By speeding up time to hire, finding quality candidates, building morale, and boosting recruiting ROI, employee referral programs are your best tool for building a stronger, more engaged workforce.
Understanding Employee Referral Programs
Every business in the world has referred employees. Sometimes it’s informal; think of someone saying their cousin is looking for a job, or that their roommate in college has the perfect background for this role.
An employee referral program is different. It’s a formal way for people to connect their friends and family to HR and recruiting in your organization.
A successful employee referral program has several key components:
- A set policy for what constitutes a formal referral
- A streamlined way for employees to refer their network directly to HR, preferably through a referral portal
- A system of rewards or benefits for successful referrals (as decided by HR)
- Company-wide awareness of the program
When you incorporate each of these components, you have an effective way to find candidates through employees. And, the best part about these candidates is that they tend to be more qualified. That’s one of the many great benefits of an employee referral program.
The Benefits of an Employee Referral Program
Employee referrals have both measurable, tangible returns, as well as more intangible benefits. We’ll take a look at each.
Better ROI Than Other Recruiting Methods
Placing ads isn’t very expensive—at least not at first. But recruiting costs add up. From the actual outlay of placing ads in various networks to the human hours it takes to actually interview and hire people, the cost of recruiting can add up quickly.
Glassdoor estimates that recruiting costs a company about $4,000 per hire.
That’s just the national average. According to the US Chamber of Commerce, it is even harder for frontline workers.
Cost of replacing frontline workers:
- Hospitality worker: $3,000 – $13,000
- Customer Service: $19,000
- Manager in Retail: $57,000
An employee referral program can quickly cut down on recruiting costs. In fact, according to studies, 82% of employers say that referrals provide the best recruiting ROI.
One of the reasons for this is that a referral shortens the time to hire.
Decrease Time to Hire
How long does it take to find a good candidate?
Here are a few interesting stats:
- Through a job posting: 39 days
- Through a career site: 55 days
- Through a referral: 29 days
By definition, an employee referral is at least somewhat interested in the job. The company, then, already has a connection with the candidate; there’s no fishing. The recruiter won’t really be talking to people who are just browsing. This saves time, and that saves money.
A Larger Candidate Pool
Imagine that there’s a person who is perfect for a position, but they already have a job. Unless they are deeply unhappy in their current role, they probably aren’t actively looking for other opportunities. They aren’t looking around. There wouldn’t be any way for the candidate and the recruiter to connect with each other.
Employee referrals can change that. A current employee can tell someone in their network about an opportunity that they wouldn’t have come across otherwise. This expands the candidate pool for the business without creating more work for HR.
Referrals Boost Tenure
Here’s an interesting statistic: 45% of employees hired through a referral stay for four years or more at the job. For businesses where the turnover rate is 90-100% (US Chamber), this is remarkable longevity.
What can a business do with longer employee tenure? Train better. Promote internally. Give employees more power to make decisions. Businesses with knowledgeable frontline workers offer better customer service, are more efficient, and tend to have higher morale.
Find Better Cultural Fits
Frontline workers depend on each other. They deal with the same frustrations and sometimes dangers. They need to support each other. They need to work together to create and perpetuate a better work culture.
Referral programs help employees bring in colleagues they already trust. Very few people refer people they think will make their own job more difficult. They want coworkers who will fit the culture that has already been developed. They want people who can make the culture even better.
How Wanzek Construction Turbocharged Their Employee Referral Program
Wanzek Construction, a leading industrial construction firm based in North Dakota, was facing the same challenges seen across the field: the need for more qualified workers. So, using Beekeeper’s communication platform, they created a seamless, easy-to-use referral platform.
The results? Over 500 referrals in less than three months.
With Beekeeper, Wanzek employees were able to use their mobile devices to submit a referral in a matter of minutes. They didn’t have to call anyone. They didn’t have to go to an office. They didn’t have to send an email. They did their part in just a few clicks.
Case Study: See how Beekeeper boosted Wanzek’s employee referral program.
Remove the Obstacles to Better Employee Referrals
Frontline businesses know they need to streamline their hiring processes to hire candidates and fill staffing shortages more quickly. That’s not always easy. But with Beekeeper’s employee referral tools, it can be done.
With Beekeeper, employees have a mobile-friendly, centralized platform where they can submit a referral in a matter of minutes. Not only that, but the mobile-first digital workplace is an easy-to-access repository of open positions. Employees can even get alerts when a job is posted to quickly refer a friend or family member.
Beekeeper lets you cut out gatekeepers, middlemen, and false leads. It saves time and improves recruiting ROI. And, it helps make sure you have engaged, committed employees for years to come.
The workplace is changing fast. Download our 2022 Frontline Trends Report or talk to one of our experts to stay ahead of the curve.
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Most Frequently Asked Questions
How do you describe an employee referral?
It’s a formal way for people to connect their friends and family to HR and recruiting in your organization.
What is a typical employee referral bonus?
Cash compensations are the most common employee referral bonuses.
What makes a successful referral program?
- A set policy for what constitutes a formal referral
- A streamlined way for employees to refer their network directly to HR, preferably through a referral portal
- A system of rewards or benefits for successful referrals (as decided by HR)
- Company-wide awareness of the program
What are the advantages of an employee referral policy?
- Better ROI Than Other Recruiting Methods
- Decreasing Time to Hire
- Having access to a Larger Candidate Pool
- Referrals Boost Tenure
- Finding better Cultural Fits
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