Filter by

Tell a friend: employee referral is sparking a recruitment revolution

Best Companies conducted in-depth research into the key trends in employee onboarding. More than 700 organisations from a variety of sectors were asked about their employee referral schemes and how they contributed to the recruitment process.

Organisations receive a large volume of job applications each week; CVs and cover letters, written by professionals with varying qualifications and skillsets, detailing what makes them the best candidate.

For years, organisations have spent a great deal of time and money on agencies, who in turn help with the recruitment process. Many, however, are quickly starting to realise that the best nose for talent belongs to their own employees – not expensive third party recruiters.

Best Companies client ISG, a global construction services company, explains: “We are always looking for talented, enthusiastic and driven people to join our team. But finding them can be challenging. Our employee referral scheme is all about asking our people to help grow our business by being on the lookout for talent. And who better to recommend our organisation to a potential candidate than our own employees!”

Phone a friend

Referral schemes are used by organisations to incentivise staff involvement in the recruitment process. Employees are encouraged to refer qualified individuals for available roles, who in turn will be rewarded with money or a few extra days under the duvet if the person they’ve referred is hired.

A typical cash reward ranges from anything between £500 to £1,000 – and is often paid in two instalments. The first when the appointment is made, and the second after a probationary period.

Our research found that 76% of organisations are now using employee referral schemes to recruit new members of staff. But, within that percentage, there are varying degrees to which different sectors are using them.

Private organisations are 57% more likely to use employee referral than not-for-profit organisations, but the scheme is becoming increasingly popular across both sectors. The current percentage of employees hired by organisations through employee referral is 14.8% for private organisations and 6.7% for not-for-profits – with the gap between the two continuing to widen. Last year, there was a 4.2% decline in the share of employees recruited by not-for-profit organisations via this method.

Wan’na be like you

These disparities aren’t unique to just private and not-for-profit organisations. The lines which divide small, medium and big companies on employee referral are equally noticeable.

B-heard survey

Small organisations (those with a headcount of 50-249 people) are less likely to offer a referral scheme than mid-to-big-sized organisations – but only just. Like not-for-profit organisations, smaller companies are starting to use employee referral more and more.

Over the past year alone, there was a small-but-significant 3.8% increase in the number of small organisations using this method to recruit. Our research also shows that employee referral is most commonly used by organisations with a record of employee engagement.

Organisations with a Best Companies 2 Star or 3 Star accreditation are more likely to adopt this scheme than those with no accreditation whatsoever. From this we can understand that employees who are engaged and happy in their place of work are more likely to be positive brand ambassadors – and will care about attracting the best talent to their parent organisation.

“Experience tells us candidates that are referred to us by existing employees are more likely to be suitable and likely to reflect our core values,” says the Worldpay b-Heard Project Manager. “We know candidates sourced in this way tend to stay with the company longer and they’re able to gel easily with our culture. Having a referral also helps with the company’s development, and we hope this goes onto boost our employee engagement.”

Heard it through the grapevine

Recruiting through the use of an employee referral scheme, however, still comes at a cost: a successful referral can lead to sizeable cash reward. But, based on an average wage of £25,000 and a typical agency fee of 15%, offering a £1,000 reward to an employee could potentially save an organisation up to £2,750.

As well as being resourceful, employee advocacy can also improve the number of job applications an organisation receives. Despite not having a formal referral scheme, Best Companies client, The National Trust, encourages their workforce to share opportunities with their networks of family and friends. “The results have seen a marked increase in actual applications from informal staff referrals – up 18% year-on-year,” they say.

The world of recruitment is often an unforgiving and unpredictable place, but within it one thing is for certain: whether it be informal or formal, monetised or voluntary, employee referral is catching on – and catching on quickly.

Best Companies
by Best Companies
Back to home