The 11 Pros & Cons of Employee Referral Schemes

The 11 Pros & Cons of Employee Referral Schemes

Have you ever considered using employee referral schemes to recruit new staff for your business?

If not, why not?

Your current team (if they’re hard-working, skilled & competent of course) are in the perfect position to recommend staff who are just like them!

And, because they are on the front-line every day, they truly know your business, culture and industry – and thus, exactly what type of person you require.

Of course, there are also some negatives (there always are)… check out the rest of our blog to find out more.

The 7 Key Pros.

There are so many reasons you should consider setting up an employee referral scheme. Here are some of the most important ones…

1. You’ll save money.

Think about it; employee referrals (should) cost a fraction of the price that you would pay a recruitment agency.

In fact, other than your time (spent assessing CVs and interviewing candidates, which you’d have to have done anyway) the only money you’d spend would be on the reward/s your referrers receive.

Of course, these would have to be compelling enough to persuade staff to take part, but they’re unlikely to be anywhere near as expensive as agency fees.

2. You’ll attract like-minded staff.

Human beings tend to hang around with similar, likeminded people.

So your staff will already have heaps of acquaintances and connections out there who are likely to fit in with the culture of your team.

If they get on with your referrer then they’re more likely to get on with everyone else too!

(Of course this does depend on how well your referrer actually fits in with the team!)

3. You’ll attract better candidates.

In the same vein, your current staff (probably) aren’t going to want to risk their entire reputations and/or careers by recommending someone unsuitable for the role.

They’ll pretty much screen candidates for you and if they think someone doesn’t have the right work ethic, skills and/or personality, they’re highly unlikely to pass their details on.

4. You’ll save time.

Of course, if your employees are completing the initial stage of screening for you (to protect their own reputation) that’ll save you some work.

Employee referrals are also often quicker in general, as there aren’t as many processes and bits of paperwork going on in the background; you’ll receive your referrals as and when a staff member thinks of them.

5. You’ll reach more people.

If every single member of your team starts getting the word out about a vacancy, especially if they post it on social media, you’ll be reaching a whole host of people that an agency could have missed.

The more people that know about a vacancy, the more likely you are to find the perfect hire.

6. They’ll be more persuasive.

It’s easier to persuade friends and family to look for a new job; especially when you know they’re not happy and you know exactly why they’re not happy.

What do you think would work better… advice from a friendly face or a cold call from a recruiter?

(For more tips on how to persuade and attract passive candidates, without the help of your current employees, click here).

7. It will increase employee engagement.

Studies have shown that getting your staff involved with decision making and giving them the freedom to voice their ideas and opinions will increase employee engagement and ultimately make them care more about your business.

This can work with all sorts of things, including recruitment!

They’ll feel like they’re involved in the bigger-picture decisions at the company and will therefore care more about what actually happens (as opposed to just showing up for work because they have to).

(If you’d like some more tips on how to increase employee engagement and get your staff to genuinely care about your business, click here.)

The 4 Main Cons.

Of course, there’s always a downside, so I’ve outlined the 4 main disadvantages below.

It’s important to point out that, although there are more advantages, the disadvantages are pretty critical and should still form an important part of your considerations.

1. Referrals can (sometimes) upset the team.

Sometimes, if you hire an employee’s personal friends and acquaintances, it can lead to cliques forming, which could potentially upset the rest of the team.

No one likes to feel outnumbered – it could breed resentment within the company.

2. It could change your referrer.

You should also consider the inevitable effect that hiring a referral could have on the referrer, especially if they’re very close.

They might be more worried about embarrassing themselves in front of someone they know outside of work, which means they might not be as open with their ideas.

They could also be more biased and likely to “side with” and support the person they’ve referred.

3. You could lack diversity and ideas.

In business you need access to a variety of perspectives, so you can cover all bases and nurture a variety of ideas.

If everyone in your team is ‘likeminded’ and similar then you risk a lack of diversity and thus, will limit the number of different opinions, ideas and viewpoints you receive.

4. You need more!

It would be pretty much impossible (and undesirable) to gain all of your new recruits through employee referrals which means you’d also have to use other strategies which cost money and will use up your time.

Otherwise, you’ll be missing out on thousands of other great candidates, your employees don’t necessarily know!

So, is it worth it?

I personally believe that employee referral programmes are a really important and worthwhile exercise when you’re looking to recruit.

But, as I’ve mentioned above, you will need to utilise other strategies too.

Recruiter Pro Tip.

Here are some tips on how to make sure your employee referral program is up to scratch…

  1. Make sure you offer a compelling reward, to spur employees to take part.
  2. Keep it simple; employees will be put off by an overly complicated process.
  3. Make the rules clear from the start. Staff won’t want to waste their time.
  4. Make it easy for employees to share the vacancy on social media.
  5. Give successful referrers a shout-out, to spread the word & make them feel special.
  6. You could turn it into a game, with leader boards, prizes (booby-prizes) and teams.
  7. Let referrers know what’s going on throughout the process.

If you’d like more helpful tips, click here.

Fancy receiving more similar guidance on all things recruitment and HR? Click here to subscribe to a short weekly update spilling the latest industry secrets!

Notify of
1 Comment
Newest Most Voted
Inline Feedbacks
View all comments
Nick Clemons
1 year ago

That’s a great balanced view. They definitely have their place but should be used as only part of the recruitment strategy. I wonder if also the recruiting manager sometimes sub-consciously favours a referred candidate over other candidates, Introducing someone should be no more than exactly that – an introduction, and they should still have to prove their worth over all the others in an interview/assessment.