What is an employee referral program?

An employee referral program is a structured program in which a company’s employee is asked to recommend a potential candidate for an open position in their organization from their network circle

Hiring managers use a wide range of strategies to find the best-fit candidate for their organization. Recruitment methods have progressed significantly over time from placing job adverts in newspapers to posting vacancies on job portals. Yet, challenges remain.

employee referral

Challenges faced by job seekers and hiring managers

According to a study conducted by MRINetwork, the inability to find suitably skilled candidates and lengthy hiring practices are the top two challenges hiring managers face.

The same is true for job seekers. According to an online poll conducted by the team at YourStory with Indeed India, 40% of job seekers (3500+) felt that the biggest challenge they face was not receiving any response from the employer during and at the end of the recruitment process. Finding insider information about the organization they are applying to was another major challenge for these professionals surveyed (18% of them).

Both recruiters and job seekers are experiencing difficulties and are looking for the most practical and effective strategy to bridge the gap between them. Employee referral comes to the rescue! It is considered the most efficient source of hire for companies and a successful way for job seekers to increase their odds of getting hired. Here are some of the benefits of using an employee referral program.


Advantages of employee referral program

· Increases quality of hire

No one can know a company’s culture better than its employees. Employees are aware and familiar with the company’s mission, vision, culture, and objectives. As a result, they are more likely to recommend candidates who are the best culture fit and are most suitable for the job role. Employees would not refer just any candidate as this would reflect poorly on them. When employees refer a candidate, they make sure that the candidate meets all the required qualifications. When employed, referred applicants are more engaged and productive because they are already familiar with the company’s practices.

· Decreases time and cost per hire 

The employee does a pre-screening of the candidates. Because the employee has already done the initial sourcing and basic screening of applications, there is no need to do it again by the hiring managers. Recruiters will save a lot of time because of this. Since no money is spent on job advertisements or recruitment agents, the cost of hiring is effectively decreased. 

· Increases employee retention rate 

According to employee referral statistics, 45% of employees sourced from referrals stay for 4+ years whereas only 25% of employees sourced through job boards stay for 2+ years. Referred candidates tend to stay longer in the company than candidates hired from other sources because they have an idea of the company’s vision and the work culture.

· Uncovers passive job seekers 

Passive job seekers are not actively looking for any new job opportunities. One of the most difficult tasks for recruiters is to reach out to this group of individuals who do not submit their applications. Through referral programs, passive job seekers who possess a good skillset and who would be an asset to the company are discovered by employees through their social circle. 

We’ve so far seen what an employee referral program is and its benefits. Let us see how candidates and employees benefit through referral programs.  

Improve your chances of being hired

According to 2022 Employee Referral Statistics, employee referrals are 5x more likely to be hired. A referral boosts your chances of getting hired by allowing your resume to get priority consideration.

The average number of applications for a job opening is 250. Only 2% of those who apply are called for an interview. When it comes to referring a candidate who is suited for the job role, employers have a higher level of faith in their employees. Referred candidates are thus exempted from the initial screening rounds and are invited for interviews, with a candidate who receives an interview having a 40% higher chance of being employed than other candidates. This improves your chances of landing a job. 

What are employee referral bonuses?

A referral bonus is an incentive that motivates employees to recommend candidates from their network. In 2020, the average referral bonus awarded to an employee was $1,500, and employees who refer a successful recruit are offered alternatives to monetary benefits in 15% of organizations. Apart from cash bonuses, prize bonuses, vacation bonuses, and custom bonuses are some of the common employee referral bonuses companies use.


An employee referral program is indeed an efficient source of hiring. It has a lot of advantages and it benefits companies, employees, and candidates. An employee referral program is a win-win situation for all the parties involved!


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