Employee referral programs (ERPs) offer a tremendously cost effective solution in the recruiting marketplace.
Not only are referred candidates generally of a higher calibre but the cost of hiring is a fraction of the cost of more traditional methods. Additionally, they stay longer AND they take less time to onboard.
Despite that a 2014 study showed that only 63% of surveyed companies had a formal documented ERP in place.
Take a look at our BIG 5 reasons for needing to implement an Employee Referral Program.
1. Reduced cost per hire – with recruiter fees averaging 15-20% of first year’s salary and job posting fees for various online sources easily totalling over $2,000, a referral fee that is typically $1,000 to $2,500 is quite agreeable. Add to this the cost savings of the other benefit of implementing an Employee Referral Program and the need is quite evident.
2. Reduced time to hire – Companies are reporting jobs remaining unfilled for 12-16 weeks on average, while those jobs filled by a referral (this includes candidates referred from recruiters) are open for 4 weeks.
3. Reduced onboarding/training time – as candidates were recognized as being of higher quality and they stayed longer referred candidates took fewer training dollars overall.
4. Longer tenure – one study showed that 45% of all referred employees were still at the company after two years compared to only 20% of those candidates hired through job boards.
5. Reduced interviewing time – referred candidates are hired at top performing firms one out of every three times while the average interview to hire ratio is 18. A Jobvite study showd that while referred candidates only represented 7% of applications, they were a full 40% of hires.
Clearly, we’re seeing the benefits in terms of lower cost and higher quality in general. In fact 88% of companies say that they view referred candidates as preferred candidates.
So it makes you wonder why 37% of companies still don’t have a formalized ERP in place. There are vendors who can set up and manage a program but the employer needs to provide the impetus.
I’ve spent my career finding candidates for companies who I have told flat out that they need to leverage their existing in house sources first. There is just no way to beat the calibre and cost effectiveness of referred candidates.
So if you don’t have an Employee Referral Program in place I’d strongly suggest that you get one.