Employee Referral Bonuses

Referral bonuses are becoming increasingly popular as employers battle the current tight labor market.  And, more clients and friends have been calling us lately to ask us about these bonuses.

Some of the benefits of an employee referral bonus program include the following:

• The quality of referrals is generally good.
• The referrals usually do not need to relocate.
• The cost is generally lower than the fee charged by an employment agency or a search firm.
• The referring employee often supports his/her referral to succeed.
• Employee morale and commitment increase when an employee referral bonus program is used.

The growing interest in referral bonuses spurred us on to conduct another famous WP&S "seat of the pants" survey.  We contacted a number of companies to obtain details on their employee referral bonus programs.  The results of our survey results appear below:

• Financial services company - Referral bonus of $100 for systems/technological positions.
• Nationwide retailer - Total referral bonus of $400 for non-exempt employee and $1,000 for exempt employee, paid out in intervals beginning as of date of hire and ending with the employee's one-year anniversary of employment.
• Apparel chain - A referral bonus of $50-$100 after employee completes 60 days of employment; an additional $50 after 180 days of employment.
• Furniture store - Referral bonus of $200 for full-time positions and $100 for part-time positions.
• Manufacturer - $50 referral bonus after employee completes 90 days of employment.

Executive Summary

Tips on Using Referral Bonuses:

• To lessen administrative headaches, keep the program simple. 
• Avoid limiting referrals to certain employee groups or job categories.  This helps to obtain a broader pool of quality candidates.
• To Maintain interest in the program, publicize it on an ongoing basis.
• When determining the premium for a position, take into consideration the level of the position and the fees that might have been paid to an employment agency or a headhunter.
• Tell employees what information (resume, employment application, referral card, etc.) must accompany each referral.
• Inform the referrers and referrals of the outcome of your employment decision.
• Follow up every referral with a response card that lets the employee know the referral was received and appreciated. 

Posted 10/9/1997