Employee referral

Employee referral is an internal recruitment method employed by organisations to identify potential candidates from their existing employees social networks. An employee referral scheme encourages a company's existing employees to select and recruit the suitable candidates from their social networks. As a reward, the employer typically pays the referring employee a referral bonus. Recruiting candidates using employee referral is widely acknowledged as being the most cost effective and efficient recruitment method to recruit candidates and as such, employers of all sizes, across all industries are trying to increases the volumes they recruit through this channel.

Proponents of employee referral schemes claim the benefits to be an improved candidate quality, ‘fit’, and retention levels, while at the same time delivering a significant reduction in recruitment expenditure.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.

Improved candidate quality, ‘fit’, and retention

The one-to-one direct relationship between the candidate and the referring employee and the exchange of knowledge that takes place allows the candidate to develop a strong understanding of the company, its business and the application and recruitment process. With this information the candidate is ideally placed to assess their own suitability and likelihood of success at the company and make an informed decision, with the support of the referring employee as to whether to apply. This is the start of the company’s recruitment process where, at no cost to the employer, candidates and employees remove unsuitable and poor quality candidates, from the recruitment process ensuring a consistently high quality of applications

Candidates who are interviewed are thoroughly prepared resulting in superior interview to job offer conversion rates. In addition, successful candidates get up to speed faster compared to other recruitment methods. Candidate ‘fit’ to the company’s culture, departments and teams is improved as the expectations of candidate and employer match. This significantly increases the level of staff retention and builds a loyal and committed workforce - ultimately reducing the company’s future recruitment requirements

Reduction in Recruitment Expenditure

Employee referral scheme’s empowers existing employees – the people best placed to recruit for their team and company – to screen, select and refer only the best candidates to the recruitment process. This eliminates the often considerable cost of third parties service providers who would have previously conducted the screening and selection process

The costs of operating an employee referral scheme extends to the cash bonus’ paid to employees and internal promotion and administration, the total of which is considerably lower than the expense of recruiting using traditional recruitment consultants, headhunters and online recruitment methods

As candidate quality improves and interview to job offer conversion rates increase the amount of time spent interviewing decreases meaning the company’s Human Resources headcount can be streamlined and be used more efficiently. Marketing and advertising spend decreases as existing employees source potential candidates from the existing personal networks of friends, family, acquaintances and associates.

The opportunity to improve candidate quality, ‘fit’, and retention levels, while at the same time significantly reduce recruitment expenditure has seen the emphasis employers place on increasing the volume of recruits by employer referral increase dramatically. However, there are number of obstacles to achieving the desired increase:

* An employees social network is limited – only a small proportion of the network may be suitable for referral
* Recruiting from an employee’s limited social network may compromise the diversity of the workforce
* Actively referring candidates increases an employee’s workload and may be detrimental to their main responsibilities
* The best and most relevant candidates may not be acquainted with an existing employee of the company and therefore cannot be recruited via the referral scheme

An employee referral scheme is only as good as the volume and quality of candidates applying through the channel.

ee also

*Recruitment
*Referral recruitment

References