Referral recruitment

Referral recruitment is a process whereby vacancies are promoted and filled by recommendations rather than by traditional methods such as direct classified job advertisements or by employing a headhunter. Proponents of this recruitment method claim that since each candidate comes with a personal recommendation behind them, the applicants are likely to be better suited to the job and the applicant already has a referee.

Many companies offer incentives to the referee, usually a monetary fee. A potential downside of referral recruitment is that these incentives can lead to candidates inventing an online alter ego for themselves to claim the reward or for them to contact a friend and split the reward.

The key advantage of referral recruitment is that it allows recruiters to reach passive candidates, those who are not actively looking for a new job but are sometimes amongst the most prized employees.

Internal Employee Referral Schemes

Referral recruitment can be owned and managed internally by the recruiting organisation. Many companies are now finding Employee Referral Schemes can successfully complement their existing recruitment methods. Job vacancies are advertised on a company intranet site and existing employees are encouraged to find suitable candidates from their friends and acquaintances and refer them to the recruitment process. If a referral is successful, the reward or bonus is typically paid after the applicant has been working for 3 months or more.

For graduate / entry level positions, employee referral schemes in the UK typically offer c£3000 reward, though this varies by company and industry with many bonuses starting around £500. Experienced hires can earn rewards as high as 10% of the starting salary depending on the industry and the company’s employee referral policy. Employee Referral Bonus is a top Recruiting & Retention Tactics according to Workforce Recruiting magazine, August 12, 2004. Employee referral schemes offer a cost-effective means of attracting applicants and avoiding the need for advertising or [employment agency] fees. Moreover, new recruits who have been recommended by existing employees often come to the company with more realistic expectations and can provide a better cultural fit.

However, there are a number of potential drawbacks. One of the greatest concerns tends to be that relying too heavily on employee referrals could limit diversity in the workplace, with new staff recruited in the likeness of existing employees. But, provided that there is already a diverse workforce in place this ceases to be such an issue.

According to the Chartered Institute of Personnel and Development's 2004 recruitment and retention survey, which showed more than eight out of 10 employers experienced recruitment difficulties, 38% of UK employers used employee referral schemes as a way of finding staff. This was up 4% on the previous year. Concerns that the policy will undermine efforts to increase diversity (why ask a largely white workforce to help in the recruitment of new staff, when we know even professional recruiters tend to employ people in their own image?) have, so far, been allayed.

As employee referral policies and schemes mature their usage is spreading to cover organisations of all sizes and all industries, not just blue chip. Cost-effective web based solutions are emerging specifically designed to maximise a company’s referral recruitment through their own internal employee referral scheme.

Organisations will develop their own in house process and employee referral policy to track employee referrals. Alternatively they may use a third party recruitment technology company to provide an application tracking system (ATS) that supports employee referral tracking. Early web 2.0 companies such as the CareerMole and Insiders Referral Network, were launched to cater for this demand.

Independent Schemes

Employment agencies, headhunters (usually web based) and online referral networks work like traditional job advertisement boards but positions have a bounty or reward attached. The referral bonus acts as an incentive for people to proactively source and select candidates for jobs that the third party recruiter is advertising.

Criteria will be set for the person making the referral (the ‘referrer’) to claim the reward. Often, the person recommended (the ‘prospect’ or ‘candidate’) will need to successfully get the job and be employed for 3+ months before the reward is paid. Some websites also take steps to ensure that direct applicants do not simply invent an alter ego by asking for a postal address and full name to make the reward payment. Referral rewards range from £50 up to 8% of the starting salary.

Proponents of this recruitment method claim that since each candidate comes with a personal recommendation behind them, the applicants are likely to be better suited to the job and the applicant already has a referee.A potential downside of this type of referral recruitment is that these incentives can lead to candidates inventing an online alter ego for themselves to claim the reward or for them to contact a friend and split the reward.

Independent job referral schemes (usually web based) work like traditional job advertisement boards but positions have a bounty or reward attached. Criteria will be set for the person making the referral to claim the reward. Often, the person recommended will need to successfully get the job then stay with the job for more than 3 months. Some sites also take steps to ensure that direct applicants do not simply invent an alter ego by asking for a postal address and full name to make the reward payment.

ee also

*Recruitment
*Application tracking system

External links

* [http://mitsloan.mit.edu/newsroom/2005-castilla.php] Referral-referee relationship is part of a “social network,” MIT Sloan Assistant Professor Emilio J. Castilla
* [http://www.guardian.co.uk/money/2005/aug/20/workandcareers.jobsandmoney When it pays to know who your friends are - Guardian Online]