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5 Benefits of Employee Referral Programs

Updated: Nov 15, 2023

Recruiting can be challenging. Hiring the right person for a position is a difficult stressful and long-lasting process. Furthermore, HR professionals face another problem. Potential hires should be drawn to an enticing atmosphere and culture. Therefore, employee referral programs are useful for locating the best candidates for positions. In this article, you will find the pros of Employee Referral programs.

Saving Time & Money

Recruiting candidates takes a lot of time and effort, which can cost the firm time and money. A study found that referred candidates are 55% faster to hire than employees sourced through career sites. Employee referrals allow current team members to make the connection. Consequently, the recruiter saves time by not having to locate the candidate. Furthermore, compared to external applicants, the individual may be a superior match. So, the process is sped up and there is less need to look for other choices. To add, the hiring process takes 29 days instead of the 39 days used for hiring through job postings. In other words, referred employees speed up the process by up to 47%.

business time and money efficiency

Better Retention Rate

After two years, retention of referred employees is 45% compared to 20% from job boards. This can be accounted to the more intimate connection with co-workers. Additionally, the referrer may feel more respected and valued after having their advice accepted by the company. Then, this appreciation and value makes an employee more dedicated. Also, you might consider rewarding employees to show appreciation. Besides this, 46% of referred hires stayed for at least one year after being hired. Compared to the 33% of people hired through career sites, this is a much higher number.

retention rate, employee relationships

Higher ROI for Employee Referrals

Firm executives concern themselves over the return on investment of funded programs.

ROI, return on investment

Near 83% of employers rated employee referrals the highest for generating the best ROI. Employees hired through referral programs produce 25% more profit than those hired through other sources. There are several reasons for this. Firstly, employees can recommend people they know are a good fit for the culture, as they reflect themselves. Alternatively, candidates are recommended by friends. Therefore, they feel a strong desire to improve performance.

Cut Recruiting Cost

Additionally, dividing time and effort into hiring new employees reduces the amount of money required. Employees promoting jobs to friends and family does not cost you any money. Also, if employees do this for free, they can reduce traditional job listings. Moreover, employees reduce external recruitment costs as they can promote better through personal relationships. This is usually just a fraction of the amount paid for hiring and advertising. To elaborate, recruiting agencies usually charge a fee of 20% of the hire’s first-year salary.

cutting recruiting costs

Receiving Qualified and Quality Candidates

Employees will want to work with someone who improves their performance and daily workload. Therefore, in most cases, you can be confident in your candidate's ability to complete the required assignments. Nearly three in ten employers have caught a fake reference on an application. So, a personal recommendation that is already within the company can instill confidence. It proves that the reference is valid and reputable.

qualified employees, recruiting well

As one HR professional put it, implementing a recruiting program that celebrates employees’ personal connections is a great way to "build glue in a company."


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Juro Gudeljevic author of article 5 benefits of employee referral programs
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