How to Choose the Right Reward for Employee Referral Programs
- Identify Employee Needs: Determine which types of rewards resonate most with your employees. These could be cash bonuses, additional vacation days, vouchers, or other incentives.
- Offer a Variety of Rewards: Combine different types of rewards to appeal to as many employees as possible and to cater to their diverse needs and preferences.
- Create a Motivation Ladder: Design a system that rewards employees for different levels of participation and success in the referral program. This can help increase employee engagement and make them feel that their efforts are valued.
- Include Team Rewards: Encourage team spirit by offering rewards for collective achievements, such as team dinners, company events, or similar activities.
While cash bonuses are commonly used, they are not always the most effective reward on their own. The average bonus for employee referrals is typically around 1,000 euros, with studies suggesting that a combination of cash bonuses and other incentives can often be more effective in boosting employee motivation and participation in the referral program.
Reward Template for Employee Referral Programs
A potential reward template for an employee referral program could look like this:
- For Initial Small Successes (such as applications & interview invitations): Smaller gift vouchers, company products, or donations to local charities
- Team Rewards (e.g., team reaches a referral goal per quarter): Weekend trips, team bowling nights, or team dinners at the company's expense
- Successful Hire: Additional vacation days or high cash bonuses (500 - 3,000€)
How Employee Referral Bonuses Are Taxed
The taxation of employee referral bonuses depends on the respective country. In Germany, the limit for tax-free non-cash benefits is 50 euros per month, while in Austria the limit is 186 euros per year. Bonuses that exceed these amounts must be taxed as income. Companies must decide whether to cover the taxes incurred or deduct them from the employee. It is advisable to consider the tax regulations in the respective country and, if necessary, seek tax advice to design the best possible reward structure for the employee referral program.
The Lever for Long-Term Active Employee Participation
A referral program is particularly successful when every intermediate success can be directly rewarded, creating a sense of achievement. However, this usually requires a digital process to avoid extensive administrative effort. From a company size of about 100 employees, it is therefore advisable to invest in a digital referral program to ensure long-term, active employee participation. A common problem in implementing such programs is the continuous motivation and involvement of the workforce. Software solutions like Sprad can help here by specifically informing employees about open positions and offering a simple, rewarding referral process. Sprad is specially tailored to the needs of desk and non-desk employees to ensure that everyone in the company has the opportunity to participate in the program and benefit from the advantages.
Further Reading:
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.
