What is Employee Referral Program?

Whether you're a beginner or an expert, you will find this Glossary useful.

Employee referrals are considered one of the most productive recruiting strategies. Research has proven that referred employees are the best employees in many different ways: they take shortest to hire, they are more affordable to hire and they stay longest with companies and have lowest turnover rate. 

Definition of Employee Referral Program

Employee referral program is an organized and structured program employers use to ask existing employees to recommend candidates for open positions.

Unlike sourcing, employee referral is an internal method used to find and hire best talent from employees’ existing networks.

What are the benefits of Employee Referral Programs?

As finding talent was identified as one of the biggest recruiting challenges, employee referrals are, by vast majority of modern recruiters, used as one of the main sources for finding high-quality job candidates. Companies that haven’t implemented a structured process yet, have confirmed that this is one of their priorities for the next year.

In today’s world of data-driven recruiting, optimizing most important HR metrics has become one of the top priorities for many companies that want to recruit and hire more productively.

Improving quality of hire

As already mentioned, referrals are considered internal method for finding job candidates. What this means is that existing employees are asked to refer a candidate for open position. Your existing employees know best who your candidate persona or your ideal candidate is. This is why employee referrals most of the time make a much better match than candidates coming from other sources.

Reducing turnover rate and improving employee retention

Because they make a better match from the beginning, referred employees often stay longest with companies. Employees who match organizational culture, norms and values better, will also stay longer with the company. This has a huge impact on one of the most important HR metrics- employee turnover rate.

Also, statistics have shown that employees who have successfully referred a candidate for an open position, stay longer with the company than employees that haven’t. Employees who refer successfully have the sense of achievement and they feel like they have done something useful for the company they work for. In addition, they tend to be much more engaged compared to other employees.

Reducing time and cost per hire

Often times, referred employees, who learn about the company from your current employees, are familiar with the hiring process and onboarding. Not only that you can get their profiles and contact information quickly, you can also hire and onboard them much faster.

Fast selection and hiring process has a very big influence on Candidate Experience which is becoming one of the most important HR metrics in the modern world of Talent Acquisition.


Since time to hire is shorter, cost to hire also drops. You need less human hours to fill a position, and this automatically makes your hiring strategy more productive and efficient.

In addition, if you know that referrals are your best employees, you can eliminate some other costly sources such as job boards.

Improving employer brand

Research by LinkedIn has shown that 75% of job seekers read about company’s brand and reputation before they apply for an open position.

When you ask your employees to recommend a candidate (and offer a good bonus), trust me they will go out there and say only nice words about you and your Employee Value Proposition.

Since job seekers and candidates trust much more employees than employers or CEOs, this is great way for attracting talent even for future job openings. Building your talent pool with these people can’t hurt you, it can only make your hiring process faster and much more productive.

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