How Does My Employee Referral Program Stack Up?

Tiffany Jin
Co-Founder
December 3, 2023
Blog
2 min read
Summary:
Employee referral programs are a valuable aspect of recruitment strategy, but it’s oftentimes easier to stand up than to maintain. Even harder to gauge where you fall in relation to competitors’ results. Here is how you can assess how your employee referral program stacks up.

1. Do you have a referral program in place? 

First, an obvious question to ask is… at minimum, do you have a formal referral program in place? About 71% of companies in the United States have an employee referral program. That number is only trending up as more companies plan to implement programs. In a recent study by Radancy, results showed that use of employee referral programs increased 7% from last year. 

So, if you already have one in place or are planning to implement one in the near future, that’s a great first step.

Next…how is it performing? 

2. Rate of Hires from Referrals

One of the most critical metrics for evaluating the success of your program is the rate of hires that come from referrals. Referrals are known to be a highly effective source of quality candidates. On average, employee referrals account for about 25% of all hires. However, some companies report even higher rates, often exceeding 40% or more. If your program isn't falling within this range, it may be time to evaluate and improve your strategy.

In our own conversations with countless TA teams across industries with varying employee sizes, here are some of the results: 

3. Referral Bonuses by level and industry

The average referral bonus can vary significantly across industries and job levels. Here's a rough breakdown:

Entry-Level Positions: Referral bonuses for entry-level positions typically range from $1,000 to $2,500, depending on the industry and company size.

Mid-Level Positions: For mid-level roles, referral bonuses can go up to $3,000 to $5,000 or even higher in competitive industries.

Senior-Level and Executive Positions: For top-level positions, bonuses often exceed $5,000, and some firms offer bonuses as high as $10,000 or more.

By industries, here's a few averages:

The average healthcare bonus is $2,500

The average hourly part-time employee is $600

The average manufacturing bonus is $1,000

If you want to dive into the details of how to calculate the right referral bonus that makes sense for your business, check out here. But we recommend always backing out from your Cost-Per-Hire.

The key is to find the right balance between offering an attractive bonus and staying within your budget. Remember that the value of the bonus can also be influenced by the difficulty of filling a particular role or the urgency to hire.

4. Are you optimizing with the right technology or partner? 

Radancy also shared that there has been a shift towards digital employee referral programs in 2023. In 2021, 26% of companies were considering a digital tool to implement, but this is now at 59% in 2023. Below are break downs of how companies are running their programs.

Very soon, I'm sure we will see less of these programs that are manually run in forms or offline methods.

Additionally, although most ATS have native referral tracking, we’re seeing that this is doesn’t cut it anymore. 

With your ATS, there’s limited capability when it comes to accounting for the more complex parts of your program (different eligibility rules, payout amounts and tiered due dates, employee visibility. etc). All components that are necessary in order to make the program successfully tracked and an overall enjoyable experience for all involved!

If you're looking to assess how your employee referral program measures up, consider these key points. While having a program in place is a good start, the effectiveness of your program is where you can truly stand out. If your program isn't meeting industry benchmarks, it may be time to make adjustments to increase participation and improve the quality of referrals. As always, having the right technology to fuel your efforts is going to be a great investment, especially if you’re using an outdated method. 

Citations:

Learn how Eqo can help you enhance your employee referral program.

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