Why You Should Be Investing in Employee Referrals

/ Best Practices, Human Resources

Looking to expand your team? Chances are you’ve perused LinkedIn, Indeed, and may have even invested big bucks in paid posts on popular industry job boards. However, the one area that has proven to be successful in hiring top talent, yet remains widely undermarketed within organizations, is the employee referral.

A recent article featured in SHRM reveals that in 2016, 30% of all company hires were a result of employee referrals. Not surprising, the idea behind a recommendation or introduction made by a colleague tends to be a more desirable route to hiring than fishing for candidates in a sea of unknowns.

Benefits of Employee Referrals

Expedite Hiring – Recruiting can be a long and drawn out process that can eat away at valuable operational hours and staff time. A recommendation from a former coworker could identify a qualified candidate faster and minimize the interview process.

Longer Tenure and Retention Rate – Studies have found that employee referrals who get hired stay in their positions longer than those found through general search. In addition, employees who refer candidates remain in their positions and benefit from increased job satisfaction.

Company Culture – Finding the right fit is as much about personality as it is about performance. When friends, family, and colleagues refer candidates for a position within their organization, it increases the odds that they share common interests and will integrate seamlessly with the rest of the team.

Cost Effective – Hiring an employee referral is a lot cheaper than going through a recruiter. Sure, you may have to pay an insiders finder fee, but it’s going to be a more affordable option than the percentage you’d invest in a placement agency.

Initiating an Employee Referral Program

The easiest (most common) way to get started launching a successful employee referral program is using compensation.  Incentivizing referrals engages employees to recruit on your behalf, and can be considered additional compensation as part of an employee benefits package.

Once a program is in place, internal marketing of the referral program is key to keeping it top of mind. This can be done in several different ways including:

  • Maintaining a section on a company Intranet that explains the program
  • Promoting all open positions to employees with a reminder about the referral finder’s fee
  • Featuring it in regular HR outreach or corporate communications to employees

Networking has solidified its place as a preferred means of hiring in today’s recruitment marketplace. In addition to word-of-mouth referrals, having a sophisticated hiring system in place will also accelerate your growth. Employing an HCM solution with recruitment capabilities will help you identify, hire, and onboard the right person faster.

Payroll Data, Wisconsin’s leading HCM partner, offers the technology and expert support companies need to simplify the complex business of HR. Our single-source platform provides a full-suite of capabilities including automated payroll, managed benefits, big data and analytics to make better business decisions, time & labor solutions, compliance, and recruiting services. Completely customized to meet your individual requirement.

Contact us to learn how a partnership with Payroll Data offers everything you need to better support the people who make your business a success.


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Give us a call at 800-805-3282. Speak with one of our experts directly who can help you design optimal HCM solutions at an affordable price. We love questions, and we’ve got answers. Trust the local team at Payroll Data.

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