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Employee Referral Program

An effective employee referral program should be an integral part of your employee recruiting plan. You have many sources you can use for your employee recruiting and you should not limit yourself to any single source.

Referrals from your existing employees have been shown to be some of the best employees. Study after study have shown that employees referred by existing employees perform better and last longer on average.

There are many benefits from a well designed and implemented employee referral program in addition to getting better employees.

The first area of improvement is you can significantly reduce your cost per hire for bring on new employees. Employee recruiting is expensive. Running ads, posting on-line and using headhunters all cost money. In many cases you will use multiple sources to build your candidate pool and the costs add up.

But giving your existing employees a referral bonus can be much more cost effective. You only have one payment. And you should be able to calculate an amount that is both attractive to your employees and cost effective for your business. A good recommendation is 20-25% of your normal cost per hire number.

The second benefit of a good program is the program can be a significant morale booster for your existing employees. They are much happier when the money you spend on recruiting "stays in the family" instead of being spent on outside sources. Your existing employees appreciate the opportunity to make more money while helping the company at the same time.

Everyone benefits from a well-run employee referral program.

Designing Your Employee Referral Program

Yourl program does not need to be complex. The first step is determine how much you want pay for the successful referral. As mentioned above, 20-25% of your cost per hire (CPH) is a good place to start. If you aren't sure of your CPH, pick a number that is attractive to your employees and you still feel good about. Then adjust as necessary based on the results you get.

You need to decide if you will have different levels of payment. You might pay a different amount for professional positions versus hourly jobs. Also, you might have special bonuses for critical, hard to fill jobs. Once again, your needs and common sense should dictate these decisions.

Next you need to determine how you want to pay the bonuses. Some organizations pay the bonus the day the new employee starts. Some wait until 90 days or when the probation period ends.

My recommendation is a combination model. Pay half of the bonus the day the person starts and the remainder at the end of the probation period.

The rules for your program can be very simple. You need a process to accept and record official referrals. You can create a simple form that your employees complete with the critical information about the referral. You might want to require a completed application or a resume as well. The submission is date stamped.

To receive the bonus, both the referring employee and the new employee must be present on the dates the payouts are due.

That's about it. It doesn't have to be overly complex.

Getting The Most From Your Employee Referral Program

To get the most from your referral program you need to generate some excitement. Promote the program constantly. Talk it up to your employees. You might consider having posters or tee shirts or coffee mugs made up to promote the program.

One other promotion you might consider is to have a contest. Raffle off a prize where raffle tickets are earned by referrals (in addition to the normal bonus). Anything that generates excitement and more referrals should be considered.

In conclusion, an employee referral program should be part of your overall employee recruiting strategy. Not only will you benefit from better employees and lower recruiting costs but your employees will appreciate the opportunity to earn extra money.

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