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What’s the Right Reward to Offer for Employee Referrals?

Best Employee Referral Reward

There's been much hemming and hawing in the recruitment blogosphere about how exactly to structure referral bonuses. I'm sure you're all familar with the reasons it's so complicated-- how do you decide the amount? Do you offer the same prize for all roles, or pay a premium on hard to fill or in-demand positions? How long do you wait after the referral starts working to pay out? Do you pay the taxes on this bonus, or do employees get to find out that their $5k bonus looks a little more like $2800?

It turns out this line of questioning might be putting the cart before the hires, since a monetary bonus is often not the most appealing incentive for employees. So rather than tumble down the rabbit hole of paying out employee referral bonuses, let’s take a step back and examine the circumstances under which employees are actually motivated to make referrals, and how you can pull those levers to build a referral culture at your company.

Contributing to high-level business goals

Many employees are motivated to make referrals because they want make a positive contribution to the company beyond their day-to-day work. Bringing in great candidates is one way to accomplish that.

In order to encourage and increase this type of referral, your recruiting team has two main tasks: keep employees informed about your open roles and keep them in the loop about the progress of their referrals. Storied recruiting veteran Dr. John Sullivan writes, “A lack of responsiveness to employee referrals is the #1 program killer that will permanently reduce employee participation rates.” So don’t be shy about maintaining communication. If you’re making a lot of hires in a particular department, partner with managers to get the word out about the roles you’re trying to fill. See if you can stop by team meetings to discuss the open roles, answer questions, and explain how referred candidates will get extra care and attention.

Similarly, once employees do make referrals, they want to know what’s happening with them. Your employee referral software (wink wink, nudge nudge) should make it easy for employees to track progress of their referrals, so make sure employees know how to do this. And even if you know they’ll be getting automated notifications, think about how you might add a personal touch, whether it’s a quick message on Slack or a brief email to let an employee know whether their candidate has been moved on to the next stage.

In order to show employees you’re serious about building a recruiting culture, consider recognizing them for all referrals they make—regardless of whether the candidates end up being hired. Some employees hesitate to make referrals because they fear their candidate won’t make it all the way to the offer stage. Remind them that this is perfectly fine, and even consider rewarding people for each stage of the interview process their referral progresses through.

If you’re going this route, rewards like a Starbucks gift card or coveted piece of company swag can go a long way. Think of ways you can tailor this to your company—maybe ask execs to handwrite notes or give a shout out to employees in a public setting. Describing the Greenhouse approach to employee referrals, recruiter Katie DiCioccio writes, “We’re in the mindset that referrals should be acknowledged—if not celebrated—for all to see (versus being behind closed doors where you’re cutting a check).”

While you can dole out small gestures of recognition on a regular basis, you might also want to think about how you can really celebrate referrals and generate excitement with one large event. Some companies put all referrers into a raffle and the winner receives an all-expenses paid trip for two anywhere in the world. Not only can this end up being less expensive than a monetary reward, but it generates much more buzz and excitement around your referral program.

Being Happy at Work

When employees love where they work and are part of a thriving culture, it’s only natural for them to want to bring more people in to experience it firsthand.

If you know your company culture is a competitive advantage, there are a few ways you can leverage it in your employee referral program. Look for ways to build your internal employer brand to generate buzz and excitement. This could be anything from celebrating referral success stories in company all hands meetings to featuring your top referrers in an employee newsletter or blog. Also, any time your company wins an award or is somehow recognized for its culture, be sure to share that information widely.

Another great way to emphasize the connection between company culture and employee referrals is during the new hire onboarding process. Many companies have realized new employees tend to be enthusiastic and excited about tapping their networks. You can even follow Stripe’s example and have dedicated onboarding sessions that introduce new hires to each department and which roles they’re currently looking to fill.

Set KPIs

Most employees care about their performance reviews—especially when the results are tied in with their chances of getting a salary increase or promotion, so you may want to explore ways of including employee referrals as a component of employee salary reviews. One thing to note here is that this doesn’t make sense for all employees. Senior employees are more interested in protecting their reputation while more junior employees tend to be more motivated by recognition or prizes. 

Some companies make employee referrals an element of manager and executive performance reviews. This should be handled delicately since the number and type of roles open each quarter will vary, but you might look at ways to assess how involved managers and execs are in encouraging employee referrals. For example, the VP of Engineering at Lyft joined a referral party and demonstrated to the entire engineering team that referrals were a priority.

It's Not About The Money, Money

As we’ve seen here, there's more to getting a referral than cutting a fat check. of factors that motivate employees to make referrals. Not sure what will work best at your company? Try talking to a handful of employees from different departments and find out what motivates them. Be sure to also ask some people who haven’t participated what’s been holding them back. Understanding what’s motivating employees at your company is the first step to creating a successful program. Have any other ideas or suggestions about how to motivate employees to make referrals? Leave us a comment to let us know!


Want to learn more about building a successful employee referral program? Download a copy of our eBook, “6 Strategies for Referral Hiring.”

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