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Employee Referral Schemes

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Staff members are increasingly being given a crucial role in the hiring of new employees to their companies, as employers respond to recruiting difficulties.

Employee referral schemes are popular in the US – where they are among the most preferred recruiting methods – and are increasingly being used in the UK, especially in the City, where competition for talent is fierce and the most gifted people are at a premium.

According to Personnel Today's sister organisation, pay specialist IRS, 77 per cent of companies running employee referral schemes agreed that they "more than recoup the time, money and effort involved in running [them] by helping [them] find good quality recruits".

What is an employee referral scheme?

In an employee referral scheme, existing members of staff are encouraged to suggest potential candidates to their employers, with rewards such as cash, holidays and even cars for those whose recommendations result in a person being successfully recruited.

The higher up the corporate ladder the new recruit is placed, the greater the reward.

47 per cent of companies in the UK ran employee referral schemes in 2008 according to the Chartered Institute of Personnel and Development. Major firms that run staff involvement schemes include Amazon, Nationwide building society, Sainsbury’s, Vodafone, Bupa and Asda Wal-Mart, the retail giant that fills thousands of positions every year.

The schemes have repeatedly proven to not only be successful but also cost-effective

Employee referral advantages

There are several advantages to these schemes, the first being that new recruits are likely to settle in at the company quickly and stay for longer because they have an instant circle of acquaintances through the friend that suggested them.

This association with a member of staff also means the new employee may already have some understanding of how the business operates, and will be motivated to put in a good performance that will reflect well on their friend.

Employee referral schemes are simple to establish, cheap to run, and can be easily publicised through a firm’s internal communications, such as an in-house magazine, intranet or company-wide memo.

Employee referral disadvantages

However, there are concerns that staff involvement schemes can stifle fresh ideas and limit the influx of new blood to a business because existing employees tend to suggest candidates in their own image.

This situation has also led to worries that a need for fairness and diversity may not be satisfied, with employees choosing new recruits from their own background.

Using employees to recruit new staff can also be a bit hit and miss. There is no guarantee that the right candidates will be suggested at the appropriate time, and for this reason, professional recruiters still have important role to play.

 
2 comments
UK Net Guide UK Net Guide
27/02/2012

Hi John,

Thanks for the suggestion, that's a very good idea and we'll be sure to look into putting together a piece on the subject.

All the Best,

UK Net Guide

 
John Dennehy John Dennehy
26/02/2012

It would be interesting to see a follow up on this article with information on how social media is reshaping employee referral programs.

We've seen a companies increase their referral hires from around 20% of all new external hires to over 50%.

John

 

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