How To Create a Successful Employee Referral Program

One of the significant benefits of working for an amazing organization is you immediately create walking and talking billboards that attract potential family and friends into joining where you work.

In addition, when you set up an employee referral program, you reward employees for referring their friends and/or family members for positions if hired, and they meet the minimum job requirements.

If you don’t already have an employee referral program, consider designing one for your organization.

Follow these principles and steps in designing an employee referral program. 

Setting Up Job Grade Levels 

First, for each job role and position in your organization, you must create a grade level for the position. This allows creating a grid for all positions within your organization based on skills, competencies required, and salary levels. Job leveling is a systemic method to objectively and accurately assign individual values to each position. 

A quick and easy way to structure job levels is to categorize jobs as entry level, mid-level, and senior level positions. 

Then you can consider the responsibility level and expectations for each job role. You need to ask yourself and others to consider the knowledge and skills required, supervisory and management responsibilities, and what you associate with specific pay bands. 

For example, a Senior Level or “Level 3” position might require 5- to 8-years of experience. They may need to have advanced skills pertaining to the professional role or industry you work in. Lead level positions usually require 8 or more years of professional experience and often require a higher-level degree or credentials.

Human Resources may enlist a team of qualified individuals familiar with many of the positions in an organization to help grade positions.

· Always remember that there is no absolute of right or wrong with position grade levels. The key is to get more agreement versus disagreement.

· Set the expectations and train your team of graders to follow the process and rubric you develop, no matter how you set things up.

· Commit to objectivity with point-based or Likert-scale scoring systems that help provide unbiased opinions as to the end grade level. 

Calculating Bonus Payment Amounts 

Now that you have your position grade levels set up, you can establish maximum values for the referral bonus in your country’s currency. This amount is the maximum amount the organization is prepared to pay an employee for a successful candidate who is successfully performing and with the company one-year after being hired. 

To help reward the employee through the referral program, you break down the total bonus referral into stages. I recommend creating a payment at three-months, again at six-months, and then finally after one-year. Divide the total amount in half and that amount becomes the last and final payment amount. You can then divide the fifty percent remaining amount into whatever incremental, round figured amount, or by percentage, that seems most meaningful to employees at each stage. 

For example, a Director of Communications position to be filled would have a fairly high position grade level and might merit an employee referral bonus of $3,500.00. The breakdown of the payment might look like $750.00 after the successful candidate has been with the organization after three-months. They would then receive $1,000.00 at the six-month mark and the balance of $1,750.00 after one-year.

In contrast, a Call Centre Representative is an entry level position and might merit an employee referral bonus of $1,250.00. Incremental payouts of the referral bonus could be $200.00 after three-months and another $425.00 after six-months. Then they would receive $625.00 at the one-year mark if the job candidate is still successfully employed and integrated into your organization. 

It’s a fairly basic system to set up to reward those employees who refer talented people they already know. 

Make sure you list the referral bonus for all positions posted on your company website. 

Recognition Reflection: How has your organization benefited from an employee referral bonus program?

Roy is no longer writing new content for this site (he has retired!), but you can subscribe to Engage2Excel’s blog as Engage2Excel will be taking Roy’s place writing about similar topics on employee recognition and retention, leadership and strategy.

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