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4 Employee Referral Downers
Wednesday, Dec 06, 2017

It is widely known that employee referral programs can be a massive boon to your recruiting efforts and in helping you find top talent.  You can’t force your employees to make referrals and at the same time you don’t want to give them any more excuses or reasons to not make referrals.  Overall, you need to ensure employees have a good experience and keep coming back to the well per se.

We talk a lot about best practices for your referral program, but just as important is avoiding the downers. Bad news often travels faster than good, and with that in mind we’ve outlined the four most common practices to avoid.

1. Forgetting About the Employee

Please don’t forget to pay the referral bonus. It may seem obvious, but you’d be surprised how often this happens.

When we help companies relaunch their referral programs we often get messages back from employees saying something like this:

Ouch!

It’s best to head-off frustration by providing proactive feedback on the status of referrals. The more transparent you are, the better. Letting employees know when their referrals have not been selected is important. When a hire is made, let them know when they can expect to be paid and then follow through.

2. Being Stingy with the Bonus Payment

Shorten your payout period

Making the reward payout waiting period too long (longer than 90 days) can be a real downer. Delaying the payout may protect your company from undue risk. But you should be aware of the effect it has on morale.  If most employee referrals stay longer than 6 months then you are just delaying the inevitable.

We recommend considering a 30 day payout waiting period.

Pay the whole bonus at once

Some companies pay the bonus in two chunks. For example, they may pay half the bonus at 90 days and the other half at 6 months. In addition to being a downer for employee morale it also doubles the amount of time your team spends tracking referral bonus payments. Save yourself the hassle and just pay the entire bonus at once.  The juice just isn’t worth the squeeze.

Lower bonuses for social referrals

Some companies are tempted to reduce the bonus for referrals sourced through social media posts. Social referrals may seem like less work, but your employees are still sticking their neck out there to promote your brand.  When their marketing efforts produce quality hires you should pay the full bonus.

3. Not Having Micro-Rewards

Getting a big referral bonus is exhilarating. Unfortunately, only a small portion of your employees make it that far, and even those who do have to wait a long time to see their bonus. It can easily take six months for their referral to apply, interview, get hired, start work, and stay employed for the set amount of time. Add to that the time is takes payroll to process the bonus and six months may easily have passed.

Rewarding participation in your referral program with micro rewards is a great way to get more of your workforce engaged. Small rewards given out early in the referral process give employees encouragement even when their referrals don't end up panning out down the road.

There are two main ways to do this.

  • Run a campaign rewarding qualified referrals. For example, you might say the first 50 people to refer a friend will get a $10 Starbucks gift card.

We helped Magan Forrester run such a campaign at the Dentsu Aegis Network earlier this year. She found her employee’s enthusiasm surprising:

 

  • Run a points-based reward program that gives a few points for a referral, a few more for someone who interviews, and even more for someone who is hired. Points can redeemed via an online catalogue. Companies that already have a points-based reward catalogue setup should strongly consider adding referrals and hires to their existing program.

4. Reward Envy

International vs. domestic

International employees can become disenfranchised if they see that you offer a substantially higher reward value for U.S. jobs than you do for similar jobs in other regions. For example, one of our clients offers a $5,000 reward for software engineers in Silicon Valley, but only ?75,000 in India. It may be difficult for us to spot the difference, but Indian employees are well aware that ?75,000 is only about $1,100.

If you run an international program you should consider ways to keep the reward values private.

Retail vs. Corporate

Retail employees may also feel snubbed if you offer substantially more for corporate positions. Be sensitive to the issue of reward envy. You might consider running two distinct reward programs: one for retail and one for corporate.


Guest post by Kendall Frazier CoFounder at Employee Referrals.