What Are Employee Referral Bonuses?

Employee introducing a client to a colleague.
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Can you get a bonus if you refer someone for a job? It depends on the employer and on company policy. In some cases, you may be eligible for a bonus simply for referring a candidate for employment. At other companies, the referral may need to result in a new hire.

Here’s information on employee referral bonuses, including what they are, when employers pay them, and how much you may be eligible to receive.

What Are Employee Referral Bonuses?

Companies seeking talent often devise an incentive system where current employees are rewarded with a referral bonus if they recommend a candidate who is ultimately hired. The bonus could be cash, or it could be a reward, such as a gift card or extra time off from work.

Some companies pay bonuses as soon as a candidate is hired. With others, the new employee may need to stay with the company for a certain period of time before the referring employee is eligible for a bonus.

If a company has an employee referral program, company policy will determine the guidelines, including how to refer a prospective employee, the size of bonuses, eligibility, and payment.

Why Companies Pay Referral Bonuses

Employers often believe that accessing the networks of current staff can be more cost-effective than other recruiting techniques, including the use of executive recruitment services. Some research indicates that incentive programs yield a higher quality employee and enhance retention of staff.

In any case, referral programs are a good way of building a sense of community and teamwork. It's in employees' best interests to recommend potential colleagues that are skilled, responsible, creative workers. No bonus is worth the social fallout from making a bad referral, especially if the referrer has to work with a less-than-stellar candidate.

A survey from ERIN reports that hiring referral candidates pays off for employers. Over 80% of employers rated employee referrals as the best source for generating a return on investment. Referred candidates are four times more likely to be hired, and 45% stay with an employer for longer than four years, compared to candidates hired from a job board. Only 25% of employees sourced through job boards stay for more than two years.

Employee Bonus Amounts

What can you earn if you refer a candidate for a job? A Drafted survey reports that 90% of bonuses are paid in cash, with 10% of employers offering non-cash rewards. For cash bonuses, ERIN reports that the average bonus is $2500.

Some payments are made in a lump sum when the employee is hired. In other cases, a partial initial payment is made with the remainder awarded at a later date (often after one year).

Other Reward Options

Company hiring incentives vary greatly by company, with cash, gift certificates, trips, and even stock options being awarded.

The Society of Human Resource Management (SHRM) reports that some companies offer other types of rewards rather than offering a cash bonus for referrals. Some of these rewards include:

  • Extra paid time off
  • Gift cards or gifts
  • Points that can be exchanged for prizes
  • Prizes
  • Recognition in a company newsletter or at a meeting

Companies Offering Bonuses

According to HireClix, 71% of employers offer a formal referral bonus program. Many other employers have an informal referral system.

At some companies, such programs cover any job. In other cases, bonuses are restricted to positions with an insufficient supply of talent. For example, an e-commerce company might provide bonuses for software engineers, especially if they're in a competitive market for tech talent, but not other roles that are easier to fill. The United States government even offers an employee referral bonus program at the discretion of individual agencies to staff hard-to-fill jobs.

It's important to note that the roles selected for bonus programs aren't inherently more valuable than non-bonus eligible roles; often, they're just harder to fill. If your job title doesn't make the cut, don't feel undervalued. But do, perhaps, go through your network and see if you have connections to refer for these in-demand jobs.

When You Should Refer a Contact

It’s important to screen your contacts carefully before passing their resume along to human resources. Before making a potential connection, ask yourself:

Is This Person Qualified for the Role?

Look at the job description and your contact's resume. Do you see an overlap? Does your friend have the relevant experience, education, and skills? If they were a stranger, would you see them as a viable candidate?

Are They Interested in the Position?

It might sound obvious, but if the potential candidate isn't enthused about the opportunity, he or she shouldn't be pushed to take it. You burn social capital every time you make a recommendation that doesn't work out. Don't set yourself up to lose by trying to force a fit that doesn't exist.

Would You Want to Work With Them?

Even if you wouldn't be working directly with your connection in the new role, it's only fair to ask yourself if you'd want to do so. If not, why would you subject your current colleagues to the experience?

Finally, once you've made the referral, your role in the interaction is finished. Don't follow up on your friend's behalf or put pressure on the hiring manager to select your candidate. At best, you'll make your connection look like someone who's not able to fight their own battles; at worst, you'll come off as less than professional and possibly stalkerish. Neither scenario will help your friend get hired, or you get that bonus.