The Importance of an Employee Referral Program

When it comes to recruiting the best people, one of the most powerful tools you can have is an employee referral program. Why? Good people often want their friends to work alongside them and so they will bring in other good people to work for your company. Developing a strong employee referral program can be a good investment for any organization. Here we will talk about the importance of an employee referral program.

High applicant to hire ratio

According to an infographic and JobVite survey information published on Undercover Recruiter, there is a much higher chance that an applicant referred by an existing employee will be hired on. They state that, “Employee referrals have the highest applicant to hire conversion rate – only 7% apply but this accounts for 40% of all hires.”

Controlled costs per hire

Obviously, one of the more cost effective ways to recruit new people is through an employee referral program. There are little to no upfront costs for advertising a new job or sourcing candidates. Often, employees will bend over backwards to supply the company with quality people they know are right for the job if there is a small reward in it for them. The recruiting community, backs this up with data, which indicates, “Job board hires cost on average $1,671 versus referral hiring costs of $2,306 (only $635 more).”

There are creative ways to “rewarding” your employees for making solid referrals. Sure, you can offer cash or money. You can also give them an extra vacation day or two, or even gift cards. We have even seen clients get creative and allow the employee to take advantage of company perks or get product for free. Some of these areas hit your pocket book less and still provide strong incentive.

Increased employee retention

The JobVite survey above also indicated that when new hires are referred by existing employees, the rate of employee retention rises dramatically. They stated that, “Referral hires have greater job satisfaction and stay longer at companies – 46% stay over 1 year, 45% over 2 years and 47% over 3 years.”

Quality of hire rises

The quality of each hire is also increased with an employee referral program, according to, that says, “Referrals are also the #1 source for new hire quality.” Think about this: If an employee shares a resume from a colleague, they are putting their job on the line too. Therefore, a direct employee referral is generally someone who already has the right skills and background to do the job well.

Temporary employee referrals beneficial

If your workforce is made up of a certain percentage of temporary employees, these folks often have a number of colleagues who may also be a good fit for your company. It is beneficial to ask the temporary staffing agency based in your area to refer more great people to your business, especially those who are already known by current temps to be trustworthy and a good match for your company.

As you can see from the above information, having an employee referral program in place can benefit your business in many ways.

Looking to hire top tier employees?

Partner with premier Modesto staffing firm, Availability Professional Staffing, to help you with developing a pipeline of strong candidates.


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