Employee referral schemes may provide a cost-effective way of finding top-quality candidates during the economic downturn, according to a recent survey by Personnel Today‘s sister organisation, pay specialist IRS.
The survey of 104 employers – covering a combined workforce of almost 436,000 people – showed that despite typically filling just 10% of vacancies per year, 77% of respondents agreed the schemes “more than recoup the time, money and effort involved in running [them] by helping [them] find good quality recruits”. And 74% also agreed the schemes “help to foster employee involvement”.
Employee referral schemes – also known as ‘refer-a-friend’ schemes/bonuses, or bounty schemes – offer a financial reward to staff who recommend someone to their employer who is subsequently hired.
The amount varies according to the nature of the post, but the median amount was found to be £700. However, it is usually only paid once the recruit has stayed with the employer for a specified period of time.
The findings showed that the most important factors in ensuring the success of such schemes were regular publicity (such as through the intranet, e-mail alerts and prize draws), a cash incentive, and clear, straightforward rules.
However, there are also potential drawbacks to such schemes – the biggest concerning diversity. Staff tend to recommend people similar to themselves, particularly in terms of ethnicity and age, which can lead to ‘cloning’. For this reason, both the sex and race discrimination codes of practice advise against reliance on such schemes.
Referral schemes should also be governed by equal opportunities monitoring systems to provide information on whether referrals are representative of the population, local community, or other relevant groups on factors such as gender, ethnicity, and age.
They need to be reviewed on a regular basis to ensure they remain effective. Where possible, they should also be evaluated against key factors such as the number of successful recruits, cost per hire, and staff retention, as well as comparisons with non-referred recruits.
A survey of 778 employers by the Chartered Institute of Personnel and Development in 2008 found that 47% of employers in the UK ran employee referral schemes, with the majority used in the private sector.