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The Best Employee Referral Bonus Strategy – How Close Are You?

By Expert Author: Savio Vadakkan

A big question that dominates any discussion on employee referral policy is the amount and process of disbursing employee referral bonuses. While there is consensus on the fact that bonuses are by far the biggest motivator for employees to refer candidates, what should be the quantum of bonus as well as the criteria and modalities of payment still remain a subject wide open for discussion.

The quantum of referral bonus to be paid is generally a function of how easy or difficult it is to hire people with that particular skill set. Roles that require highly specialized or niche skills or people with specific domain experience will need to be offered higher bonuses to justify the time and effort needed by employees to search among their connections for people with the required niche skills. Jobs for which people with the required skill sets are relatively easily available can be offered lower incentives as part of the employee referral program. A general thumb rule while deciding on the referral bonus is to peg it at 20-25% of the normal cost of hiring for that role through an external agency. It is also important to keep in mind that the referral bonus should be perceived by employees to be a good enough amount to justify his or her time and effort in referring candidates and should be in proportion to the value it brings to the organization.

The traditional model of employee referral program tends to reward employees for successful referrals and tends to ignore the large mass of employees who have referred candidate who could not be hired due to any number of reasons. Best practices in employee referral programs now seek to reward employees in small ways for the very act of referring irrespective of the outcome with a larger largesse for successful hiring.

Some of the more recent best practices related to disbursal of employee referral bonus are given below. It would be a good idea for organizations and especially HR teams to compare their referral bonus strategy against these best practices to explore possible areas of improvement

• Plan a hiring budget against each job description. This allows organizations to implement a tiered employee referral bonus program which rewards every employee who has made a relevant referral. This acts as a great motivator to draw more referrals. Employee whose referral is finally hired is rewarded with the highest bonus, while employees whose referral make it to the final list but are not hired get a lower portion and so on.

• Cash incentives are not the only ways to motivate employees. Small gifts like gift cards or t-shirts or other merchandise offered on a regular basis help to keep employees engaged with the hiring process. Another way is to offer employees who have referred candidates an opportunity to participate and win in a larger prize draw like a laptop or a TV or a holiday etc.

• Offering employees the opportunity to contribute their referral amount to a charitable cause attaches a higher value purpose to the employee referral program which in turn helps to draw more employees to this.

• Attach a supplemental referral bonus amount for positions or roles that are hard to fill as they require specialized, niche skill sets.

• If you are looking to hire fast for a position, a good option is to introduce limited period bonus add on for referring candidates upto a specified date post which the supplemental bonus is removed.

• Lastly, companies have gone beyond referral bonuses to recognize employees who have contributed significantly to the success of employee referral program by felicitating them at office functions or with handwritten notes from senior leaders.

How you reward employees is as important is what you reward them, which is why it makes sense to implement some of these strategies for paying our referral bonus to make your employee referral program more effective.

To read more on trends and technologies in employee referrals visit: zalp.com/theemployeereferralblog

Author Bio:

Savio Vadakkan is the Marketing Professional at ZALP, Savio Vadakkan is the Marketing Professional at ZALP, a unique employee referrals booster. Latest employee referral tool like ZALP have features like analytics help organizations track the employee activity thus tracking the entire employee referral program performance.

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