How to Choose the Right Incentive for Employee Referral Programs
- Identify Employee Needs: Determine which types of incentives resonate most with your employees. These could be cash bonuses, extra vacation days, vouchers, or other perks.
- Offer a Variety of Incentives: Combine different types of incentives to appeal to as many employees as possible, taking into account their diverse needs and preferences.
- Create a Motivation Ladder: Develop a system that rewards employees for various levels of participation and success in the referral program. This can help increase employee engagement and make them feel valued for their efforts.
- Include Team Incentives: 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 incentive 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.
Template for Employee Referral Incentives
A potential template for an employee referral program could look like this:
- For Initial Small Successes (such as applications & interview invitations): Small gift vouchers, company products, or donations to local charities
- Team Incentives (e.g., team reaches a referral goal per quarter): Weekend trips, team bowling nights, or team dinners at the company's expense
- Successful Hiring: Additional vacation days or high cash bonuses (500 - 3,000€)
How to Tax Employee Referral Bonuses
The taxation of employee referral bonuses depends on the 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 exceeding these amounts must be taxed as income. Companies must decide whether to cover the taxes or deduct them from the employee. It is advisable to consider the tax regulations in each country and seek tax advice if necessary to design the best possible incentive 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 rewarded immediately, creating a sense of achievement. However, this typically requires a digital process to avoid extensive administrative effort. For companies with around 100 employees or more, investing in a digital referral program is recommended to ensure long-term, active employee participation. A common challenge in implementing such programs is maintaining continuous motivation and engagement among the workforce. Software solutions like Sprad can help by informing employees about open positions and providing a simple, rewarding referral process. Sprad is specifically tailored to the needs of desk and non-desk employees, ensuring that everyone in the company has the opportunity to participate in the program and benefit from its 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.
