What are employee referral bonuses?

Employee referral bonuses are a system used by companies to attract talent, where current employees are rewarded with a referral bonus if they recommend a candidate who is eventually hired. The bonus can be cash, or it can be another reward such as a gift card or additional time off work.

Why do companies pay referral bonuses?

Employers often believe that tapping into the networks of current employees can be more efficient than other recruitment techniques, including using executive search services. Some research suggests that referral programs lead to hiring higher quality employees and enhance employee retention.

In any case, referral programs are a good way to build a sense of community and team spirit. It is in the interest of employees to recommend potential colleagues who have the skills, accountability, and creativity. No reward is worth the social engagement resulting from a bad referral, especially if the person who made the referral has to work with an underwhelming candidate.

A study from ERIN indicates that hiring referred candidates is profitable for employers. More than 80% of employers rate employee referrals as the best source for generating return on investment. Referred candidates are hired at a rate four times higher than candidates hired from job boards. 45% of referred candidates stay with the employer for more than four years, compared to hired candidates from job boards where only 25% of employees stay for more than two years.

Employee bonus amounts

What can you earn if you refer a candidate for a job? A study from Drafted shows that 90% of bonuses are paid in cash, with 10% of employers offering non-cash rewards. For cash bonuses, ERIN indicates that the average bonus is $2,500.

Some payments are made as a lump sum when the employee is hired. In other cases, a partial initial payment is made with the remaining amount granted later (often after one year).

Other reward options

Recruitment incentives greatly vary from company to company, with cash bonuses, gift certificates, trips, and even stock options being offered.

The Society for Human Resource Management (SHRM) indicates that some companies offer other types of rewards instead of providing a cash bonus for referrals. Some of these rewards include:

• Additional paid time off
• Gift cards or gifts
• Points that can be redeemed for prizes
• Awards
• Recognition in the company newsletter or at a meeting

Companies that offer bonuses

According to HireClix, 71% of employers have a formal referral bonus program. There are many other employers who have an informal referral system.

In some companies, these programs cover any job. In other cases, bonuses are limited to positions that are experiencing talent shortages. For instance, an e-commerce company may offer bonuses for software engineers, particularly if they are in a competitive market for tech talent, but not for other roles that are easier to fill. Even the U.S. government offers an employee referral bonus program, at the discretion of individual agencies, to fill hard-to-fill positions.

It is important to note that specific roles in the bonus programs are not more valuable than roles that are not eligible for bonuses; often, they are just hard-to-fill roles. If your job title is not selected for the bonus programs, don’t feel undervalued. However, you might want to review your network and see if you have connections to recommend those sought-after candidates.

When should you refer someone?

It’s important to carefully vet your contacts before passing their resume to HR. Before making a potential connection, ask yourself:

• Are
• Is this person qualified for the role?
• Look at the job description and your contact’s resume. Do you see overlap? Does your friend have the relevant experience, education, and skills? If they are strangers, do you see them as potential candidates?
• Are they interested in the position?
• It may seem obvious, but if the potential candidate isn’t excited about the opportunity, they should not be encouraged to accept it. You lose social capital every time you make a recommendation that doesn’t work out. Don’t lose yourself by trying to force an alignment that isn’t there.
• Would you want to work with them?
• Even if you won’t be working directly with the new contact in the new role, it’s fair to ask yourself if you would want to do so. If not, why put your current colleagues through that experience?

Finally, once you make the referral, your role in the interaction is over. Don’t follow up on behalf of your friend or pressure the hiring manager to choose your candidate. At best, it makes your connection look like someone who can’t fight their own battles; at worst, you come off as less than professional and possibly intrusive. Neither of these scenarios will help your friend land the job, and it won’t help you get that bonus.

Source: https://www.thebalancemoney.com/what-are-employee-referral-bonuses-2062988