Do referrals save money?

Studies about recruiting candidates through employee referrals have proven that it is the most efficient and effective way to hire top candidates, but why is that? Recruiting new talent through current employee referrals: Saves money.

tryroots.io - Here's How Employee Referrals Save You Time and Money - Roots

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There’s a cliché that says, “It’s all about who you know.” When recruiting high-quality candidates through employee referrals, that cliché often stands true.

Studies about recruiting candidates through employee referrals have proven that it is the most efficient and effective way to hire top candidates, but why is that?

Recruiting new talent through current employee referrals:

Saves money Saves you time Provides high-quality candidates Boosts retention Cuts onboarding time Makes building a strong company culture easier While traditional methods of recruitment, such as posting on job boards and career sites, are still useful, recruiting candidates through an employee referral program helps to weed out the noise while giving your employees a chance to earn some extra cash or other incentives to help you out. It’s a win, win situation, and here are some of the main benefits of employee referral in more detail.

1. Employee Referrals Save Money

A third-party recruiter might command fees of up to 25% of an employee’s first salary. This can be a hefty cost, especially when hiring for many job openings, or for roles that require a very specialized skill set that might not be easy to source on the job market. And even if everything goes well, the talent they find still has to prove they are a fit for the role and the company culture. An increasing number of companies are opting to pay their own employees a healthy referral bonus instead. The amount of the cash bonus may vary, but it’s unlikely to be as expensive as a third-party recruiter fee.

Employee referral programs save you money by:

Cutting cost per hire

Requiring fewer resources

2. Employee Referrals Save Time

Having to sift through hundreds or even thousands of applications is a massive time-sink and can easily fatigue your recruiters to the point that it affects the precision of their selection process. An overworked hiring manager who cannot produce results they are proud of might eventually burn out or even leave the company, adding another problem to your already struggling hiring processes. According to a case study by LinkedIn, referring employees want to protect their reputation. They’ll only send you the highest-performing contacts they believe are the best candidates for the role. Your employees don’t want to jeopardize their own careers in the referral process. The study also shows that referred candidates take, on average, 29 days to hire. This is compared to a 55-day hiring average for a candidate that responds to a job board post.

An employee referral program saves you time by:

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Having referrers who are aware of the specific needs of the vacancy

Cutting the effort put into the initial filtering of potential candidates

Simplifying the recruitment process

3. Employee Referrals Provide High-Quality Candidates

Your high-performing employees will bring you other high-performing employees and top talent. Let’s look at the data. A study by Greenhouse found that hires from employee referrals produce nearly 25% more profit than from other sources. This makes sense. When referring someone for a role, employees want to make sure they are referring someone they trust and would be happy to work with, a bad referral might also impact their reputation in the team/organization beyond just the quality of their work. While it’s true there is a risk of employees simply referring anyone just to get the cash bonus if that is the case in your company, it might be time to question aspects of your organization’s culture, values, hiring processes, and even compensations, before blaming it all on bad referrals.

Employee referrals provide higher quality candidates by:

Benefitting from the network of people you already trust

Making employees partly responsible for the selection of their coworkers

4. Employee referrals increase retention rate

New hires through referrals tend to stick around longer, and a solid employee retention rate is a sign of a successful recruitment strategy. In a study by JobVite, 46% of referred employees stayed at their position for longer than a year. Only 33% of people hired through career sites and 22% hired through job boards stayed on longer than a year. But that’s not all, referrers also tend to have higher retention rates, showing that this recruiting technique has many unexpected positive effects.

Employee referral programs increase retention rate by:

Cutting the risk of hiring candidates who are unskilled or not a good culture fit.

Giving employees an opportunity to have an impact on hiring

Providing a cash benefit

5. Employees hired through a referral program take less time to onboard

Forbes found that referred candidates acclimate to the company culture much quicker than candidates from other sources. Why?

“The new employee is already connected. It’s not like they’re walking into a strange place.” This creates a sense of community among your staff, allowing for a quicker and easier culture fit and a more enjoyable and rewarding work environment.

Employee referral programs cut onboarding efforts by:

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Hiring new employees that are already somewhat connected to the environment

Having “mentorship“ structures that are naturally developed

6. Referrals make for a better company culture

If you want a pool of highly qualified employees that will be happy to work with your current staff, why not allow your current staff to find the top talent for you?

It’s easier to build and implement a strong and successful company culture in an environment in which people already know and trust each other, where teams have an understanding that goes beyond work projects and in which they are rewarded for bringing other talented individuals into the organization. While it’s true that referrals can be a cause of reduced diversity when this issue isn’t accounted for, they can equally be powerful tools to help ensure diversity in your organization is being fostered and promoted, as we wrote in a previous post.

Employee referral programs boost company culture by:

Having referrers act as gatekeepers of company culture and values

Making culture tangible by empowering employees to actively engage in referrals

Boost Your Hiring Process Game With Referrals, by Roots

Setting up a successful employee referral program has never been easier and can be set up in just a few clicks from the comfort of your Slack workspace. Referrals by Roots is a plugin that automates announcements of open roles, making it easy for existing employees to know what vacancies they can suggest to their network of qualified candidates. This plugin makes the referral process a breeze. Less time spent figuring out how to refer the best candidates for open positions means more quality submissions and higher employee engagement. Referrals also help gamify the referral process, creating a sense of positive competition among individuals, teams, and departments, ensuring your pool of qualified job seekers is ever-growing. At Roots, we work hard to create tools that make life easier for recruiters and HR professionals. If you are looking for ways to improve your onboarding process, employee satisfaction metrics, and retention, be sure to check out all of our tools, and start building the future of work today.

tryroots.io - Here's How Employee Referrals Save You Time and Money - Roots

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