Employee Referral Programs: A Winning Strategy for Small Businesses

| July 27, 2023

In a competitive job market, small businesses need to find creative ways to attract and hire top talent. One strategy that is becoming increasingly popular is employee referral programs.

What is an employee referral program?

An employee referral program is a way for businesses to incentivize their employees to refer qualified candidates for open positions. When an employee refers a candidate who is hired, the employee typically receives a reward, such as cash, gift cards, or paid time off.

Why are employee referral programs so effective?

There are a few reasons why employee referral programs are so effective for small businesses. First, employees are more likely to refer qualified candidates because they know the company culture and what it takes to be successful. Second, employee referrals tend to be more engaged and productive than other hires. Third, employee referral programs can help businesses save time and money on the hiring process.

How to create an effective employee referral program

If you're thinking about creating an employee referral program for your small business, here are a few tips:

  • Make it easy for employees to refer candidates. The easier it is for employees to refer candidates, the more likely they are to do it. So make sure your program has a simple, streamlined process, allowing employees to send a resume, provide an email and phone number, or submit a standard form to start the referral process.
  • Offer incentives. To enhance the appeal of referring friends and family to the company, employers may provide monetary rewards, paid time off or other gifts to current employees who refer quality candidates for open jobs.
  • Keep employees informed. It’s important to keep employees in the loop about the status of their referrals to avoid frustration and increase transparency. For example, let them know when the referral has been received, if interviews are scheduled and where the candidate is in the overall hiring process.

Here are a few additional tips to make your employee referral program more engaging:

  • Acknowledge the Referrers. Public recognition can go a long way with employees, so small businesses should consider awards or public praise to let employees know they appreciate their effort in sending referrals and being brand ambassadors. 
  • Use technology to your advantage. There are a number of software programs that can help you manage your employee referral program. These programs can automate the process, track results, and even provide insights into your candidate pool.
  • Make it fun! Employee referral programs can be a lot of fun, so don't be afraid to add a little bit of personality to yours. You could offer prizes for the employee who refers the most qualified candidates, or you could create a referral leaderboard.

Because employees know the company culture and employee experience firsthand, they are uniquely positioned to understand other workers who would thrive in the environment or perhaps have a similar disposition as themselves. Word of mouth travels fast, so small businesses can use that to their advantage to secure more top talent.