5 Tips to Building an Employee Referral Program

employee referral program

As a business owner, your employees are your most important customers. Without engaged, passionate staffers, a business will struggle to succeed. Therefore, it is vitally important to attract only the best when it comes to talent. Any efforts you put in to assemble an effective team will pay off in returning customers later on.

The best way to build a stable of rock star employees is with a strategic employee referral program, or ERP. Below are a few things to consider when building your initiative.

Building an Employee Referral Program

Offer a Juicy Incentive

By participating in a referral program, your employees are basically recruiting for you. Make this effort worth the time by offering incentives. Money is always appreciated (maybe $500 for an entry-level hire that stays at least six months; $1,000 for a senior-level hire). If you are low on funds, consider offering paid days off, free lunches or even work-related rewards visible to other employees.

For example, if the referrer has long complained about feeling uncomfortable in his or her desk chair, spring for a new one of the Herman Miller variety. Not only will your referring employee feel pampered, but the daily presence of the swanky chair will entice other employees to bring their best talent forward, too.

Another idea is to offer raffle prizes. Maybe compile the names of all referring employees and pull out one name per quarter. Offer that person a huge prize (maybe a trip to Vegas, if your budget allows) and watch as you receive an influx of referrals the following quarter.

Build a Sense of Urgency

If more than 50 percent of your business happens around the holidays, convey to your best employees a sense of urgency in connecting with seasonal hires and offer an incentive with an expiration date.

Make it Easy to Refer

The easier it is for an employee to refer, the more referrals you’re going to get. Forget written referral forms. Instead, create an email address specific to referrals to help you keep track of them.

Take Every Referral Seriously

It’s easy to empathize with the employee who refers his or her best friend only to never hear back about the status of the application. Don’t do this to your employees.

Regardless if you hire the candidate or not, take every referral seriously and, at the very least, follow-up with your employee on why you did or did not feel that the referral was a good fit for the company.

Promote Your ERP

Make it fun. Pass out t-shirts with your company logo and “We’re hiring!” printed on the back. Host an ERP launch party in your office, or better yet, in a local bar and tell your employees to invite their friends (ahem, future candidates). Hang posters on the walls of your office that promote the program.

Now watch the referrals roll in.

Introduction Photo via Shutterstock


Yaniv Masjedi Yaniv Masjedi is vice president of marketing at Nextiva, a leading provider of cloud-based, unified communications solutions, headquartered in Scottsdale, Arizona. He manages the firm's marketing and branding efforts and initiates programs related to brand management, demand generation, advertising, marketing communications and thought leadership.

7 Reactions
  1. I have got lot of help from this article. Employee referral programs are simply the most effective recruiting tool. I can say that the reward amount should be sufficient too to motivate employees to make referrals. Thanks for sharing!

    • Thanks, Maegan. I’m so glad you enjoyed reading the article. And I agree–reward amounts need to be large enough to really entice employees. Thanks for your comment!

  2. These are some great tips if you have a great company that has engaged employees. What I have found with many smaller companies is that until a company gets their culture right and their employees are highly engaged, employee referral programs are not effective. The referrals you get are not quality because the team you have are not fully engaged. They do it for money and not to improve the company.

    • Thanks for your comment, Beth. You make an excellent point. Yes, these tips are for companies with already established cultures focused on employee satisfaction. In order to build an effective referral program, small business owners are smart to look at the culture of their companies first. Otherwise, negative/dysfunctional hiring cycles can continue.