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How to Start an Employee Referral Program


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In this highly competitive market, finding top talent can be a challenge. Employers are searching for successful recruiting methods to bring in the right employees to grow the business. An employee referral program (ERP) can provide you with great talent and at a low cost.

It does take some upfront time to create the right program for your company, as well as marketing time to educate the employees on the value of the program. Once this initial investment has been done, the effectiveness of your recruiting efforts becomes more powerful.

=>Why would you want to create an employee referral program?

-Attract strong job candidates - employees are usually careful who they offer as a referral.

-Involve employees in the growth of the company - your employees are great sales people as they know the company.

-Employees receive acknowledgment for their involvement.

-Cost effective - an effective award pays out a “referral fee" but it is a lot less than outside recruiting firms.

-Decreased time in hiring - since the employee did the initial screening for you, you can move quickly to see if this candidate is a right fit for the position and the company.

-Retention - there is indication that employee referral hires have a strong retention value. The value of retention affects both the existing employee as well as the new hire from this recruiting program.

You do need to do some research to create the program that works best in your environment, though there are basic components of the program.

=>Create a Process

Set up a process for the employee to submit a referral. . . keep it simple.

-Designed the employee referral program (ERP).

-Create an online system as it cuts down on the employee, candidate, and company's time to process the application. If you go manual, have a form the employee must complete, attaching the candidate's resume. I would put in a question on why the employee recommends the candidate.

-Contact the referral within 48 hours. . . if not sooner. Employee referrals should be highlighted and fast tracked through the recruiting process.

-Keep the employee in the loop as to the status of the candidate.

-Thank the employee throughout the process. . . recognition is a powerful tool in maintaining interest in this program.

-If the candidate is hired, notify payroll for payment to the existing payroll.


If the employee finds a strong candidate, they need to be recognized and awarded for their efforts. As you see, I used “recognized" and “awarded", both of which are important ingredients of a successful employee referral program (ERP).

Most employee programs are not for significant amounts. . . up to $1,000 per hire, depending on the position. It can be as simple or as elaborate as the talent you need to find. . . do some research when you develop the reward portion of the program.

=>Marketing The Program

-Out of site, out of mind. . . very true words for programs that a company initiates. Therefore, keep this program in front of the employee via emails notifying open positions, posting on the intranet, or publicly acknowledging a successful employee as the company's “talent scout. "

-Have senior leaders involved in the program's success. We all know that if top management supports a program, the program is likely to get more publicity and recognition. They could recognize at a company meeting all the “talent scouts" and present them with a token of recognition.

=>Ongoing Support of the Program

-You need to have at least one champion of the program. This individual or department is responsible for keeping the employees up-to-date on the open positions as well as educating them on the value of participating in the program.

-This education must provide tips for the employee to evaluate potential employees for the company. You want them to refer candidates that are at least as good as they are or better.

-Have a lunchtime seminar. . . market it with $500 dollar bills (make believe) posted everywhere. The picture of the dollar bill should indicate the amount that you are actually offering for each employee referral. . . . whatever the amount, peak the employee's interest.

-There are many places an employee can find potential candidates. . . friends, peers in other companies, professional organizations, someone they know in another organization that could recommend a potential candidate. . . it's all about networking.

-If the employee has a network of contacts. . . have them use their rolodex to find talent for the company.

=>Problems with this program

-You want great talent. . . . you have to educate your employees what you are looking for. Give them guidelines or they will refer family and friends who may not be a match for the company.

-Too many rules and regulations and the employee will lose interest. . . keep it simple and effective.

-The reward for finding talent must be effective. . . or they will not be interested. Do some research and find out what other companies are offering.

-If you don't actively market the program, it will collect dust. This is a definite waste of a great recruiting method.

Take the time to research this topic. . . the market for great talent is very competitive and you have the inside talent to locate new talent.

Copyright (c) 2008 Pat Brill

Pat Brill is the author of the blog “Managing Employees" can reach her at


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