Internal Employee Referral Schemes

Referral recruitment can be owned and managed internally by the recruiting organisation. Many companies are now finding Employee Referral Schemes can successfully complement their existing recruitment methods. Job vacancies are advertised on a company intranet site and existing employees are encouraged to find suitable candidates from their friends and acquaintances and refer them to the recruitment process. If a referral is successful, the reward or bonus is typically paid after the applicant has been working for 3 months or more.

For graduate / entry level positions, employee referral schemes in the UK typically offer c£3000 reward, though this varies by company and industry with many bonuses starting around £500. Experienced hires can earn rewards as high as 10% of the starting salary depending on the industry and the company’s employee referral policy. Employee Referral Bonus is a top Recruiting & Retention Tactics according to Workforce Recruiting magazine, August 12, 2004. Employee referral schemes offer a cost-effective means of attracting applicants and avoiding the need for advertising or [[employment agency] fees. Moreover, new recruits who have been recommended by existing employees often come to the company with more realistic expectations and can provide a better cultural fit.

However, there are a number of potential drawbacks. One of the greatest concerns tends to be that relying too heavily on employee referrals could limit diversity in the workplace, with new staff recruited in the likeness of existing employees. But, provided that there is already a diverse workforce in place this ceases to be such an issue.

According to the Chartered Institute of Personnel and Development's 2004 recruitment and retention survey, which showed more than eight out of 10 employers experienced recruitment difficulties, 38% of UK employers used employee referral schemes as a way of finding staff. This was up 4% on the previous year. Concerns that the policy will undermine efforts to increase diversity (why ask a largely white workforce to help in the recruitment of new staff, when we know even professional recruiters tend to employ people in their own image?) have, so far, been allayed.

As employee referral policies and schemes mature their usage is spreading to cover organisations of all sizes and all industries, not just blue chip. Cost-effective web based solutions are emerging specifically designed to maximise a company’s referral recruitment through their own internal employee referral scheme.

Organisations will develop their own in house process and employee referral policy to track employee referrals. Alternatively they may use a third party recruitment technology company to provide an application tracking system (ATS) that supports employee referral tracking. Early web 2.0 companies such as the CareerMole and Insiders Referral Network, were launched to cater for this demand.