Employee Referral Policy: An Ultimate Guide With Templates For HRs
Referral bonus policy
8 min read
October 9, 2023
If you’re an HR, you know how tough it can be to find the right talent these days.
You put up job ads everywhere, scrolled through resume after resume, and ran interview after interview—only wondering, “Does the perfect candidate even exist?”
Sounds familiar?
Here’s the thing – your best hires might be right under your nose, or maybe they’re in your employees’ networks. Employee referral programs are one of the most effective recruitment strategies. Yet, many organizations either don’t have a clear HR policy in place.
Whether you’re planning to build a referral program from the ground up, refine your current strategy, or simply get the most out of your referral bonuses, this guide will cover everything you need to know.
Note: You can download directly from here and edit as per your needs.
An employee referral policy is an official HR policy guideline that enables existing employees to recommend competent candidates for positions within their company.
Think of it as your structured roadmap that transforms a casual job offering into a systematic talent acquisition.
How does it work?
Program awareness:
Clear details help employees participate effectively. The HR team introduces the referral program to employees by sharing all the important details in a simple way.
Employee identification:
Employees put forward candidates they feel would be a strong match for the organization. These are people from their professional networks. Referrals are usually submitted through:
Referred candidates have to go through the usual process of screening, interviews, and assessments to ensure fairness.
Referral details submission:
Employees submit referrals through designated channels. Key information includes candidate contact details, relevant experience, position of interest, and the employee’s relationship to the candidate.
Reward system:
Many referral programs reward employees with perks. These are usually provided once the referred hire successfully completes the probation period.
Let’s understand what an employee gets under the employee referral program policy.
Your best hire might already be in your employees’ network!
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Here are some benefits that show why this HR strategy is proving to be a game-changer for modern businesses.
Higher quality of candidates:
Employee referral programs consistently produce quality candidates. When employees make a referral, they’re vouching for the candidate, confirming they have the right skills for the role.
Cost-effective:
Unlike traditional hiring methods like job ads or hiring recruitment agencies, which are extremely expensive, an employee referral policy program is a cost-effective option. Even when offering referral bonuses, the cost is often much lower compared to external hiring sources.
Retention rates improve:
Referred employees demonstrate significantly higher retention rates. This stems from realistic job expectations set by referring employees and stronger initial cultural connections. When a new hire joins, they already have a friendly connection at work.
Enhances the brand:
When team members recommend your company to their network with great passion and enthusiasm, it shows the value of your organisation’s culture. This is far more genuine and impactful.
Limitations Of An Employee Referral Policy
While these are some of the most attractive benefits, there are also certain limitations to them.
Favouritism:
Sometimes, employees might refer friends or acquaintances because of personal connections rather than their actual skills. This can give rise to favoritism.
Lacking in diversity:
Since there are chances that referrals come from the same network, they can unintentionally reduce inclusivity in the workplace.
Pressure associated with it:
Sometimes, employees feel pressured to take part in the program, especially if they don’t have a large network group.
Quality issues:
While referrals are usually strong candidates, not every referral is a good match. Some employees might refer just to get the bonus, which can increase the screening burden on HR.
Now we know both advantages and disadvantages of having an employee referral policy. Let’s look at some tips on how you can draft one.
Tips To Draft An Employee Referral Policy Program
Here are detailed tips to help you draft a policy that drives results while maintaining fairness and compliance:
Have clear objectives & scope:
It is essential to clearly define the purpose of drafting this policy, along with its scope and other details.
Establish eligibility rules:
Specify:
Which positions are open for referrals?
Who can participate?
Are there any restrictions?
This is essential as it will prevent confusion and build trust.
Create referral submission process:
Make it easy for employees to submit referrals, set clear deadlines based on job postings, and more.
Communicate & market the program:
Develop comprehensive marketing plans that keep employees informed and engaged. Create channels, including email updates, postings, team meetings, and others. Highlight success stories, available positions, and program changes that encourage employees to look for candidates within their network.
Maintain transparency in evaluation:
Set clear parameters to track success. Set up ways to collect feedback. Schedule regular program reviews to assess effectiveness and identify improvement opportunities.
To give you a better understanding, let’s look at an employee referral program sample.
Employee Referral Policy Program Template
Objective:
As an organization, we believe that great people are often connected to other great people. Therefore, we are expanding our hiring efforts through our most valuable communication channel: our employees. This policy aims to allow our employees to refer suitable and trustworthy candidates for available positions within our organization.
Scope and Applicability:
The Employee Referral Program is open to:
– All employees up to the Assistant Manager Level
– All Support Function members (excluding the Recruitment Team)
Let’s call it the RAW (Refer and Win) program. When you refer outstanding candidates, the organization gains higher-quality hires, and you have the chance to win a cash reward.
Policy Owner:
This policy is owned by , reachable at and .
Policy/Process:
How Do I Get My Referral Bonus:
Referral bonuses are paid through payroll and are subject to applicable taxes.
<xx>% of the bonus will be paid to eligible employees once the referred candidate completes one month in the organization.
The remaining <xx>% becomes payable after the referred candidate completes <xx> months of successful employment or the end of the probation period.
Referral Bonus Payment Criteria:
Payment is made when the following criteria are met:
– The referee is employed and not serving notice period at the time of payment.
– Referred applicants are on the Company rolls with no intention to resign or serve notice period at the time of payment.
Referral Criteria:
Candidates referred by a senior for their own team will be interviewed by an interview panel that excludes the referring team member.
The referred candidate, if shortlisted, won’t report to the individual who referred them (unless approved by Management). There’s no limit to the number of applicants an employee can refer, but it’s advised to conduct a basic background check before referring. The referred candidate should know the name and details of the employee who referred them.
How do I Refer a Candidate:
Employees can send resumes of eligible candidates to (Email Address) with “Referral CV – Position Name” in the subject line, along with their name, employee ID, and department.
Policy Terms & Conditions:
This policy can be revised at the discretion of <Company Name Here>. The cost of the bonus will be covered by the department where the candidate joins.
Special Circumstances and Exceptions:
– This policy does not apply to Senior Management Team members and the recruitment team.
– It’s not applicable for internal IJP (Internal Job Posting).
– Any deviations from this policy require HR approval. Changes to the policy need Legal and Compliance approval.
Non-compliance and consequence:
Non-compliance will be handled on a case-by-case basis, with appropriate action taken by HR.
Employees must follow ethical practices when referring candidates; unethical behavior will result in disciplinary action and forfeiture of RAW incentives. If already paid, the Company may recover the amount from the employee.
Employee Referral Policy Program Sample
Conclusion
An employee referral policy is an effective strategy that aims to attract high-quality talent without incurring significant costs in the recruitment process. While it has its fair share of challenges, following the tips that we discussed here, you can draft a well-structured policy and deliver exceptional results. So, if you also want to take your employee referral program to the next level, then Superworks is all you need. Here, you can create, manage, and automate referral policies seamlessly, bringing the right talent directly to your doorstep. Book a demo today.
FAQs
Who can contribute under the employee referral policy?
Every employee who is working full-time and has a network of candidates who are looking for a job can contribute.
When do employees receive their referral bonuses?
Typically, Half after the referred candidate completes one month, and the remaining after they finish their probation period.
Can employees refer candidates for positions that haven't been officially posted yet?
This varies by company policy. To get a better clarity on this, do reach out to your organisation’s HR for further details.
Does a referral guarantee a job?
No. Candidates have to go through the screening process, interviews, etc. Referral is simply a way to recommend the candidate.
Written By :
Alpesh Vaghasiya
The founder & CEO of Superworks, I'm on a mission to help small and medium-sized companies to grow to the next level of accomplishments.With a distinctive knowledge of authentic strategies and team-leading skills, my mission has always been to grow businesses digitally The core mission of Superworks is Connecting people, Optimizing the process, Enhancing performance.
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