Employee Referral Programs Can Be Cost Effective

Employee referral programs (ERPs) are becoming one of the most cost-effective recruiting methods available, according to a survey released by the Society for Human Resource Management and Referral Networks.

Of the 586 HR professionals polled, the 2001 Employee Referral Program Survey found that a total of 80% of survey respondents felt that Employee Referral Programs are more cost-effective than job search firms, and almost 70% said that the programs are more cost-effective than other recruiting practices.

Program Effectiveness

• 37% of respondents indicated employee referral programs were more effective or extremely effective compared to other recruiting methods.
  
• 36% said that employee referral programs were effective or extremely effective in increasing retention of current employees.
  
• (34%) indicated the programs increased the number of interested candidates.
  
• 65% of respondents said their organizations have either a formal or informal employee referral program.

Program Incentives

• Financial rewards were clearly the most frequently used (77% for exempt positions and 78% for nonexempt positions).
  
• Cars were second (23% and 22%) and;
  
• gift certificates came in a distant third (8%). In most cases, the amount of the award was predetermined and distributed after a required tenure period of the new hire – usually three months.

Overall Summary

When asked if their organizations placed enough emphasis on and/or investment in their employee referral programs, 44% of respondents agreed or strongly agreed that enough emphasis was placed on employee referral programs for exempt positions. Respondents also cited challenges such as lack of program awareness (36%) and stimulating employee participation (33%) as impacting the success of their organizations’ employee referral programs.