Organizational Wellness

Embrace Employee Referral Programs for a More Engaged Workforce

Dec 5, 2022
Last Updated Jun 1, 2023

There’s a lot that goes into recruiting new talent. 

And we don’t mean that in the sense “It’s a big, well-oiled machine that everyone can depend on to help the company grow.” What we’re saying is that talent acquisitionis time-consuming, labor-intensive, and (all too often) ultimately fruitless

Just look at the numbers: SHRM reports that 75% of HR professionalsbelieve that there is a skills gap among new applicants, and research from Lattice suggests that 52% of new hireswho have been employed for less than three months are actively looking for new opportunities. And when you consider that about 4 million Americans per month quit their jobs in 2022(and a total of 47 million Americans likewise walked out on their employment in 2021), well, let’s just say that the situation may warrant some concern. If only there were someway to reduce the costs associated with talent acquisition while also improving the quality and caliber of the new hires you bring in. Would thatbe something you might like to explore? Hmmm?

Alright. We’re done being coy. Let’s talk about employee referral programs

What Are Employee Referral Programs?

Employee referral programs are an approach to recruiting in which an organization encourages its current employees to take a more active role in the recruiting process by identifying and recommending candidates for open positions — usually in return for a nice employee-referral bonus. When used effectively, employee referral programs can be an important part of a company’s wider talent acquisition strategy.

And if you think that means talent acquisition teams are essentially paying off employees to handle a lot of the heavy lifting associated with recruiting… then you’re absolutely right

And that’s a good thing! Because when you dupe employees into doing the job for you, they do it betterthan you. Hey, don’t shoot the messenger; we’ve got data points to back us up. 


What are the Benefits of Employee Referral Programs?

Maybe it was harsh to say that your current employees are better at recruiting than you are. We’re sorry. What would be more accuratewould be to say that employees have access to recruiting pools that traditional talent acquisition teams may not. We’re talking about the employees’ personal and professional networks. 

An enticing employee referral bonus program incentivizes current employees to dip into those networks and consider which friends and associates might be a perfect fit for the open position. This effectively bypasses (and trivializes) a hugechunk of the acquisition process. Rather than investing large amounts of time, effort, and money into generating leads, finding talent, and screening and shortlisting your available candidates, you get to jump into the process afterthe hardest parts have already been done

And that makes for some note-worthy benefits, such as:

Reduced Time to Hire

Do you need to fill a position right now? If you’re using traditional recruitment techniques, you might be shiftout of luck. The median time to hirenon-executives across all industries is 44 days, so you could be waiting on that new hire for a month and a half. On the other hand, the average time to hire referred employees is only 29 days— and many are ready to get started even faster than that. 

Reduced Cost per Hire

How much do you invest in bringing in new hires? It’s naturally going to depend on your industry and the position you’re trying to fill, but it’s widely accepted that the average cost per hire is around $4700. It’s also generally understood that whatever you end up paying in traditional recruitment methods, you’ll save about $1,000 by skipping all of that noise and concentrating on referred candidates. 

Increased Quality of Hires

It goes without saying that most positions need more than just a warm body to keep an office chair from floating away. The entire point of recruitment isn’t to find someone; it’s to find the right someone. It’s estimated that bad (meaning disengaged, unproductively, or unskilled) employees cost their organization at least 30% of their first-year expected earnings. Employee referrals rely on the employees themselves to help determine quality of hire and weed out the unqualified candidates, so you can relax, secure in the knowledge that you’re spending your time working with only the best of the bunch. 

Better Cultural Fit

One of the most important things you can hire for is the culture of your workplace. Employees who are not a good cultural fit just don’t jibe with your organization’s mission or values, and they aren’t a match for the overall personalityof your company. But while determining cultural fit can be extremely difficult using traditional recruitment practices, it’s nearly effortless when you’ve got a trusted employee vouching for the candidate.

Increased Employee Retention

Remember just a little bit ago when we said that more than half of new hires are already looking for other opportunities? Yeah, that sucks. What doesn’tsuck is that referred employees almost always stick around for significantly longer, improving your company’s employee retentionrates in the process. There may be several different factors at play here (referred employees are better professional and cultural fits, they already have friends in the organization, etc.), but the end result is that using employee referrals when hiring increases retention rates by ~46%across the board. 

Unmatched Employee Engagement

Do we really need to say it? Giving your workforce the opportunity (and incentive) to recruit their friends and associates turns your company into one, big, happy family. Current employees enjoy the feeling of trust and sense of value that comes from helping the organization grow. Referred employees join up with a built-in resource and social group to help them more quickly move past the awkward early stages. And everyone benefits from more-qualified people sliding into important positions. In other words, a good ​​employee referral means happier and more engaged employees, all around. 


Create Employee Referral Programs that Work: 3 Tips

With so many advantages associated with employee referral programs, the only real reason notto make employee referrals a part of your talent acquisition strategy is if you don’t know how to do it. And we’re going to take care of that little concern right now

Here are three tips to help you get started:

  1. Create a Strong Company Culture and Brand

As philosopher Desiderius Erasmus once said, “There is no joy in possession without sharing.” The power of your brand and your company cultureneeds to be potent enough that your employees are eager to share it with others. If you can master this aspect, employee referrals will naturally follow.

  1. Find Rewards that Suit your Employees

In many cases, your employees will be motivated to bring in referrals simply because they are invested in the team’s success and they want to work with the best people. Still, there’s nothing wrong with sweetening the pot with a great employee referral bonus. And while everyone likes money (or at least needsit), the best and most motivating bonuses may not be financial. Instead, work with your employees to determine what kinds of bonuses they’re really interested in. 

This may include everything from extra vacation days, to gifts, to special events, and beyond. And if you want to show your people how much you value them, give them the gift of wellnesswith subscriptions to gyms, studios, and health-centric mobile apps. The right recognition programscan go a long way towards encouraging your best people to bring in theirbest people, so start thinking beyond the bucks.

  1. Commit to Ongoing Refinement

Once you’ve got your employee referral program’s structure and reward system all figured out, you should be all done, right? 

Hahahaha. Nope.

Employee referral programs aren’t static— or at least they shouldn’t be. They need to be capable of dynamically adapting to match the current realities of your business and the preferences of your workforce. As such, setting goals, constantly evaluating, more constantly re-evaluating, and tirelessly refining your approach are all essential to ensuring that your program remains effective. This means tracking the right metrics:

  • Time to hire
  • Cost of hire
  • Number of total referrals
  • Number of hired referrals
  • Number of referrals per role or department
  • Retention rate from referred employees
  • Performance metrics for referred employees

Compare these key performance indicators (KPIs) against your established goals to see where they might be falling short. Then it’s simply a matter of strategically tweaking the program, analyzing the results, and then tweaking it again (etc.). It may seem daunting, but the benefits are well worth the effort. After all, cracking the code on employee referrals will make you a talent acquisition hero, and a hero’s work is never done…



If traditional recruitment and talent acquisition strategies are leaving you (and your organization’s open positions) unfulfilled, there is a better way. Employee referral programs democratize the power to recruit, giving your employees the freedom to pour their enthusiasm into the talent pool. And when that happens, finding the right people to bring onboard becomes that much easier. 


But before your workforce can start evangelizing the merits of your brand, they need to know that they are respected and valued. Talk to a Wellhub wellbeing specialisttoday, and create an employee culture worth sharing.




Wellhub Editorial Team

The Wellhub Editorial Team empowers HR leaders to support worker wellbeing. Our original research, trend analyses, and helpful how-tos provide the tools they need to improve workforce wellness in today's fast-shifting professional landscape.


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