In this article, you will find:
- What employee referral bonuses should look like; and what they shouldn't
- Employee referral tips and tricks from practice
- What does a complete bonus concept for employee referrals look like?
Introduction: Why you too can benefit from an employee referral program
Zalando, Deutsche Bahn, Adidas, and even smaller or medium-sized companies use employee referral programs as part of their recruitment strategy to attract and retain particularly hard-to-find talents. In fact, these companies can reliably fill up to 50% of their open positions through employee referrals.
The preference of many companies to systematically rely on employee referrals is not surprising, as such a program is generally much more cost-effective and efficient than hiring a headhunter. With the right measures and especially the right reward system, employee referrals can also be a predictable and continuous source of new hires for your company.
However, this only works if the concept is tailored to your company and a few important factors are considered. What these are and how this could look for you, you will learn here.
Escaping the "Dark Void" Effect – Successful Employee Referrals Only Work with Timely Bonuses
Have you or someone you know ever made a personnel recommendation to an employer that then seemingly disappeared into the "void"? This is a common phenomenon in many companies, which we call the "Dark Void" effect. When an employee makes a recommendation, there is often no further communication. Whether the recommendation was accepted or not, the employee ideally only finds out 6-9 months later when the paycheck arrives after hiring and the probationary period. By this time, the employee has long forgotten their recommendation, and the reward comes too late to have a lasting psychological effect. A lot of potential is left untapped here. And unfortunately, this is still the best-case scenario in many companies. If the recommendation is ignored or rejected, the employee often receives no feedback at all – and that is very demotivating. It is understandable that employees hesitate to participate in such a process and invest their time and personal relationships.
In short: It is crucial to acknowledge the progress and successes of employees in a timely manner, communicate decisions and process steps, and reward fairly.
How to Choose the Right Bonuses for the Employee Referral Program
Habits only form when the goal is truly attractive and there are quick, motivating successes along the way. This applies to personal routines, but also to making participation in a referral program a habit! For this, the program needs:
- high visibility in the company (an email or announcement on the "bulletin board" is not enough)
- a barrier-free and simple participation (little bureaucracy; little initial effort)
- and attractive rewards.
While a well-thought-out program, like Sprad, ensures the first two points, each company must find out for itself which rewards it should and can offer. After all, a simple bonus, i.e., more money, is not attractive enough as an incentive for everyone. Cash bonuses can be an attractive option, especially for employees at lower or middle levels, but less so for people in leadership positions who are already financially secure. Some people also associate the cash bonus with being bought when it comes to friends and acquaintances, which creates an internal conflict. Finding the right and exciting rewards that appeal to as many employees as possible is therefore not just a question of money.
Step 1 is therefore: Find out your employees' preferences.
“What do your colleagues consider an attractive and fair reward for their participation? Are they weekend trips? Additional vacation days? Seasonal supports like supermarket or Christmas vouchers? Or even something social and selfless like donation opportunities? (Insider tip!) There is no way around it: You have to ask your employees what they want.
When choosing rewards, it is not only important that they are motivating but also that they are ideally visible in the company and a topic of conversation. A one-time payment will interest no one, and the employee who receives it will tell no one about it.
It would be more original to reward the person who diligently participates in the program and regularly makes recommendations with something they would like to talk about with a clear conscience. It is important that the recommendation (the employee's action) is rewarded, and not just the end result, which is outside their sphere of influence (i.e., the hiring). Our examples of bonuses with high internal visibility and "word-of-mouth" potential:
- A walk with the CEO (a great story to tell colleagues; and possibly a big deal for the employee in question)
- Being allowed to use the best employee parking space for a month (always visible to everyone; generates word of mouth)
- Company car that can be used for two weeks ("the referral mobile")
Jürgen Ulbrich
Jürgen Ulbrich has more than a decade of experience in developing and leading high-performing teams and companies. As an expert in employee referral programs as well as feedback and performance processes, Jürgen has helped over 100 organizations optimize their talent acquisition and development strategies.
