How Employee Referral Programs Work

Conceptual hand writing showing Employee Referral Program. Business photo showcasing Recommend right jobseeker share vacant job post written by Man on Notebook Book on wooden background Pen.
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Employee referral programs are formal programs employers have instituted to encourage employees to refer candidates for jobs at the company. Referral programs benefit both the employer and the current employees. In some cases, a bonus can be earned if a referred candidate is hired. 

When you're searching for a new job, a referral from someone who already works at a company can get your resume a closer look, and may even get you an interview. So, while you’re searching, look around to see if you have any contacts at the companies where you’d like to apply. If you do, then maybe your contact can help you get a job referral and get a benefit from the company in return for their effort.

Benefits for Employers

A referral program is a way to help ensure the company is recruiting top talent for available positions. The assumption is that current employees are uniquely qualified to identify the best candidates since they know the organization's mission and company culture. Employees may have friends or colleagues they know to be talented and who would fit into that culture.

Benefits for Job Applicants

For job seekers, a referral is a way to get your application priority consideration. When companies receive many applications for every available position, a referral can help yours stand out from the crowd of candidates.

It's always a good idea to check LinkedIn to see who you might know who can refer you for a job. If you're a college graduate, also check with the alumni or career office for a list of alumni who may be able to assist.

How Employee Referral Programs Work

Employers with effective programs promote the option regularly to employees and provide an easy mechanism, like a paper or online referral system, for staff to forward referrals.

Providing employees with a summary of selling points for working with the organization and educating employees about effective ways they can reach out to prospects are important ingredients for viable programs.

Employee referral programs that have some mechanism for employees at all levels to make referrals are often the most effective. Some organizations conduct some specific targeting towards employees believed to have contacts from prior employers who are competitors or who have a reputation for developing high impact talent. 

Employee Referral Incentives

Programs often have financial incentives for employees who make viable referrals like prizes, time off, free travel, and cash rewards. Sometimes small rewards are provided for any referred candidate who ends up getting an interview. 

In other cases, rewards are contingent upon referred candidates being hired and remaining with the organization for a specified period of time.

Non-financial incentives such as formal recognition of employees who make referrals through corporate communications can also be effective. Recognition of contributing employees by supervisors can also be an incentive.

Friend-of-the-Firm Referrals Programs

Some employers have expanded their referral programs beyond employees only and have added mechanisms for non-employee "friends of the firm" to recommend candidates for vacancies. Companies set criteria for who qualifies as a friend. Common categories of friends include ex-employees who have left in good standing, suppliers, clients, consultants, college interns, family members of staff, high-quality candidates who have declined offers, and members of advisory boards or boards of directors. 

Most organizations establish guidelines for referrals. For example, most companies stipulate that recommendations should be supported by tangible evidence of an individual's past performance. Firms make it clear that they are looking for top performers. They may provide materials to educate employees on the best way to approach and screen potential referrals. 

Some firms will put incentives in place including cash or prizes if referred individuals are hired and stay with the organization for a specified period of time.

Potential Benefits for Employers

As with employee referral programs, a major potential benefit of a friend program is the opportunity for an employer to source high performing individuals who are not looking at job advertisements or otherwise actively seeking new jobs.

Also, by relying on friends rather than strictly employees, employers open themselves up to a much larger hiring pool. An additional benefit is that friends of the firm are not on the payroll, so the time spent looking for potential hires is free for the company (beyond any cash or prize incentives).