Moneyzine
Contents
/Careers Guides/Employee Referral Program

Employee Referral Program

Moneyzine Editor
Author: 
Moneyzine Editor
1 mins
September 26th, 2023
Advertiser Disclosure

Definition

The term employee referral program is used to describe an incentive system that allows existing employees to receive a monetary award if they refer a job candidate and that individual is subsequently hired. Employee referral programs are based on the view that recruiting through social networks is more cost effective than alternative approaches.

Explanation

Companies will sponsor employee referral programs if management believes their existing employees' social networks are a reliable and cost-efficient source of new employees. An employee referral bonus is oftentimes awarded to a current employee if the individual they refer is ultimately hired by their company. Typically, the new hire must stay with the company for a predetermined period of time before the bonus is paid. For example, an employee might be paid $1,000 if the individual they refer is hired and they stay with the company for at least six months.

Employees are thought to use good judgment when they select candidates to be recruited. This can save a company the expenses normally associated with the recruiting process.

One of the criticisms of these programs is they can limit diversity in a company. The social networks of existing employees may share the same thoughts and opinions as the employee. This is less of a concern if a great deal of diversity already exists in the business. The process of referring candidates can also be a distraction to an employee, and may be detrimental to their productivity or performance.

Related Terms

Related Content

  • Is It Worth Pursuing a Master's Degree?
    In an era where education is synonymous with opportunity, many consider pursuing a Master's degree a surefire way to advance their careers. However, is it really the golden ticket to success we've been led to believe?
    March 21st, 2024
  • The gender pay gap, the persistent disparity in average earnings between men and women throughout their careers, serves as a critical measure of wage inequality. This gap underscores the ongoing issue of income disparity, despite the ideal of equal pay for equal work.
    March 14th, 2024
  • 7 Essential Financial Moves After Losing Your Job
    Navigating the stormy seas of job loss? You're not alone.
    February 23rd, 2024
  • The Most In-Demand Skills to Get Hired in 2024
    Every job requires a combination of vital skills, but what skillset is valued most in 2024? As the job market evolves, staying ahead means it’s key to understand and acquire the skills that employers value most.
    April 12th, 2024
  • Key Productivity in the Workplace Statistics for 2024
    In 2023, global employee engagement saw a slight uptick, with 23% of employees engaged, up by two percentage points. However, a sizable 59% are categorized as disengaged, while actively disengaged employees, known as "loud quitting," declined to 18%. These figures highlight the persistent challenge for organizations to cultivate happiness and productivity in the workplace.
    January 31st, 2024

Contributors

Moneyzine 2024. All Rights Reserved.