If Bonuses Don’t Work – What’s the Right Incentive for Referral Programs?

Chances are high your company offers employees a monetary bonus when they refer a candidate who then is hired (and who stays with your company for a set number of months).

But there’s a problem:

Referral Bonuses Don’t Work!

“Wait a minute!” you say. “It’s a fact that 82% of employers rated candidate referrals from their current employees higher than all other sources for providing the best ROI. What do you mean they don’t work?”

Answer: as powerful as referral bonuses are when employees refer people they know to you, they only work if employees actually refer job candidates. And yet too often, company managers “go begging” when it comes to getting employees to refer people they know to the company.

So while referral bonuses DO work when it comes to finding and hiring terrific people, they’re ineffective because your employees aren’t referring people.

Employee referral programs are terrific…but only if you actually receive #employeeReferrals! Here are a few reasons why your program may be broken and how #AI can help fix it in @RedBranch's latest blog. #employeEengagement #recruiting #HR Share on X

3 Reasons Why You’re Not Getting Employee Referrals

 1. It’s too complicated!

Let’s say I know a great person for an opening in my department. But how do I refer her? Can I submit a form online, or do I have to type it up and hand it to HR in person? If I just tell my supervisor that I know someone and my boss ends up hiring her, shouldn’t I get the referral money anyway?

And when do I get my reward? When she’s hired? Or after a few weeks? Does she have to stay a certain amount of time? If this isn’t clear, how can I find out? And if she stays long enough, who is responsible for asking for the bonus?  Do I need to fill out a form? Does my boss? It’s so confusing!

2. The bonus offered is “meh.”

While employee referral rewards don’t have to be cash-based, they do have to excite employees. A parking spot right in front of the building spot for a week? Big deal. But a month? Now you’re talking! A Friday afternoon off? What about a whole Friday once a month for three months? I’ll take THAT!

The point is that you need to excite employees by making the reward “big” enough to grab their attention, whether it’s monetary or some other reward.

3. You’re rewarding employees at the wrong “end” of the hiring process.

Who likes to wait? Sure, with maturity comes patience, and if the reward is big enough or important enough to me, I can grin and bear it.

But waiting is bearable when I have some control over the outcome. Referring my friend and then having HR and a recruiter and then a hiring manager or hiring committee take their sweet time in making a decision? Well, I have no say. And, harking back to the “it’s too complicated” point above, I also don’t have any idea how the process is unfolding.

Is it any wonder – in a culture that allows us to order Deadpool car seat covers on Amazon at 3 p.m. and get them delivered to our house tomorrow ­– that employees loathe referring people for openings when they have to wait weeks or months to receive a reward (which may not even happen)?

The Right Way to Run Employee Referral Bonus Programs

I’ve talked about why employee referral bonuses may not work, so what does? Here are some ideas:

Consider rewarding employees immediately for referrals.

Provide a small reward for merely sending in a name and contact information, and make sure to give it as soon as an employee provides a referral.

In addition, you might want to think about keeping the excitement going and holding a monthly raffle for everyone who has referred someone that month for the chance to win much bigger prizes, such as spa gift certificates, airline miles, etc. The more people an employee refers, the more tickets they receive.

You will want to publicize the raffles internally, of course, naming winners and their prizes (and how many people they referred that month). You can continue with a monetary reward once the hired referral stays with the company for the period you set. Make sure you publicize any of these rewards when given.

Make it extremely easy to refer a candidate.

• Train managers to note when an employee gives them a name/contact information for an opening. – You can, of course, ask employees to make a “formal” referral. Just make sure it’s easy to do so.
• Ask department managers to announce openings in other departments as they come up.
• Regularly publicize the online, internal referral portal on your internal social channels, if you have them.
• Make it easy for current employees to ask questions about the job, so they have more information to tell to their referral.
• Announce bonus winners when awarded.
• Make sure you thank the employee for the referral, even if the person referred isn’t qualified or is otherwise a poor candidate.

One of the biggest peeves employees have about #employeeReferralPrograms is the lack of communication regarding the process: When will I get the reward? Will I know if they aren’t chosen? #AI can help keep employees in the loop and increase the number… Share on X

Closing the Communication Gap in the Referral Rewards Process

Perhaps one of the biggest peeves employees have when it comes to employee referral programs is the lack of communication regarding the process:

• When will I receive the reward? When I refer someone, or when they are hired?
• What if they leave after just a few days or weeks?
• Who will tell me – and when – if my candidate is hired or not hired?
• Will I be told if they aren’t chosen? Will I have a chance to “argue” for my candidate?

Keep Employees in the Loop Regarding Their Referral’s Candidacy

Just as it provides actual candidates with real-time updates of their progress during the hiring process, chatbots ) can be set up to message your referring employee as to their referral’s progress. It can also let them know who the hiring manager is, and let them know how their referral compares to other candidates. You can even set up the chatbot to announce the opening to all of your employees, letting them know the qualifications needed, the salary range, and more.

Help Make Your Employees a True Part of Your Recruiting Process

Employee referrals are such a valuable part of your recruiting process: they provide terrific candidates and, if hired, these candidates tend to reduce cost-per-hire by $3K or more. They also tend to stick around longer, with retention of referred hires after two years standing at about 45%, compared to just 20% for hires found from job boards.