Why Companies Pay Employee Referral Bonuses
Till some time ago, an employee referral program was just another feel good scheme from the HR function which ran more on paper than in actual life. However as companies started adopting innovating means to hire much needed talent,they have begun to to focus on and strengthen their social employee referral program for greater effectiveness. High success rate of using employees as recruiters, in terms of faster hiring, better quality of candidates and lower recruitment costs, stand testimony to its efficacy.
Employers have nowwoken up to the enormous untapped potential of personal networks and the hiring success that they can potentially produce if utilized effectively. Typically employees average around 150 contacts on social media networks, which translate into approximately 15000 potential candidates for an organization, with employee strength of around 100. Businesses are increasingly focusing on social media recruiting tools to tap this virtually untapped talent pool through innovative and rewarding employee referral programs.
Employers are willing to shell out significant amounts as referral bonuses to motivate and prod employees into tapping into their social network for hiring. The bonuses are intended to push employees into actions like email to their alma mater’s mailing list, or connect with potential candidates on linked in or any other social media. Reaching out to one’s network could beaccompanied with social implications, hence employees are may not be keen to put in the extra effort unless encouraged with monetary and other rewards.
In Last year’s BRW Best Places to Work awards, 40 out of the top 50 companies offered a referral bonus, which only goes to show that the benefit of successful referral programs extends beyond ensuring vacant positions are filled. They can contribute significantly towards building a congenial working atmosphere leading to lower attrition rates.
Also combining employee referral and social recruiting works out to be less expensive than employing the services of a recruitment agency or other recruitment methods like advertising on job portals. The amount of referral bonus varies substantially from company to company depending on the recruitment needs of the company at that particular point in time. The referral bonus is generally paid out according to guidelines established by the company related to process of referring a candidate and eligibility.
A survey by Jobvite reported higher levels of job satisfaction and retention among employees hired through employee referral tools, with a sizeable 47% of employees hired through employee referrals, staying with the organization for more than three years. Candidates acquainted with a current employee have a better sense of the organization and its culture while joining, and are also able to adapt much faster with a known employee mentoring them in the initial phases.
