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employee referrals

Why employee referrals are crucial for hiring in tech, and how to get them

Employee referrals are extremely valuable. On gaining referrals, quick responses keep all parties interested and the program rolling. Read on to find how you create the perfect employee referral scheme.

Tech companies are in a tussle for talent like never before. Back in 2018, a LinkedIn study highlighted the industry’s Achilles heel: a chart-topping turnover rate, 13.2% at the time. With the pandemic easing, the problem seems to have resurfaced and compounded. Multiple sources now reveal Indian IT majors grappling with an attrition rate upwards of 20–25%. Nevertheless, the silver lining, experts suggest, is that the massive churn in the employee talent pool should settle down as 2022 progresses.

Hiring teams find themselves amidst considerable buzz and tension in the job market. Employees who may have earlier not considered changing alliances, now aspire for value in different shapes and sizes, be it a fatter paycheck or a flexible work schedule. They are open to jumping ship. Simultaneously, the rapid pace of digital acceleration juxtaposed with the sparse availability of highly-qualified, domain-specific talent means that hiring managers must act swiftly and smartly.

There may be no way to entirely ‘short-circuit’ the hiring process. However, treading the plank of employee advocacy has proven benefits: better talent, shorter hiring time, reduced cost per candidate – the works! Here’s why employee referrals are too crucial a hiring method to be left underutilized in 2022.

Why do employee referrals work?

Statistics show that employee referrals amount to a large percentage of any given company’s total hires. Data by Gary Crispin published on SHRM pegs this figure at 28–30%, and this can rise to about 45% if more emphasis is placed on the method.

From the perspective of the candidate, a referral establishes an element of trust. Job listings and company websites provide a minimal amount of data about working in the organization. Getting invited by someone who’s ‘been there, done it’ can create a crucial bond between the potential hire and the company. It’s similar to booking one hotel rather than the other, if for no other reason than the reviews. Candidates are likely to go where they have good reason to believe they will succeed.

From the perspective of the employer, a referral means the candidate is, to some extent, already pre-qualified. The fact that a candidate is referred to the company by someone privy to the work culture and demands can drastically improve the quality of the hire. In other words, candidates coming through employee referral programs are vetted by more than the HR team.

It’s a win-win for candidates and hiring teams, and this is reflected by the fact that referrals enjoy a much higher job-offer rate than regular applicants.

Top advantages of employee referral programs

88% of employers agree that employee referral programs are the best source of recruitment, backed by data from Zippia . Here are some reasons why:

Larger talent pool

An employee referral program grants instant access into the employees’ networks. The best talent may very possibly lie outside the company’s reach, and employee networks can help expand the talent pool exponentially. Moreover, many potential employees may be “passive” about wanting a new job and so, may simply not appear on job boards, search engine ads, career pages, and so on.

Higher conversion rate

Data from software company Jobvite shows that referred candidates enjoy a conversion rate of around 40%. Having such a high number of successful placements vis-à-vis the jobs available is extremely beneficial to the budget. It means spending less on the recruitment process. What’s more, compared to the copious amounts of résumés received through other channels, employee referrals are normally few in number. Companies have access to high-potential candidates through referral programs. 

Quicker turnaround time

In a tech world of fierce competition and unrelenting product development deadlines, time is not just money – it’s survival. Here’s where a referred candidate can be gold. The fact that a referral makes candidates and recruiters confident of success translates into a more pleasant recruitment process. Statistics reveal that it implies a shorter recruitment time: 21 days versus the 39-day average, according to data from software company ERIN.

Longer service tenures

Statistics from ERIN also reveal that referred employees stick around longer. Compared to those who come through job boards, nearly double the amount stay committed to a company for double the time frame. Why do referred employees budge less easily? It is probably because they have the inside scoop before joining. They know what they are getting into and make an informed choice to join the company.

Better culture fit

Job listings seek to match technical skills with project requirements. However, will the candidate fit into the team? How will the candidate fare in the company in the long run? A current employee who knows both the company’s culture and the candidate’s personality can help bridge this divide. In fact, recruiters see this culture fit reflected in a high level of employee engagement. 

Lower costs per hire

Multiple sources agree that employee referrals are less costly than other sources of recruitment. Companies sidestep the fees they’d encounter along the traditional hiring routes. More importantly, when putting together domain-specific skill, a low time to productivity, and a high retention rate, the result is a better quality employee – at a cheaper price tag!

How to inspire great employee referrals?

Invest in the program

Employee referrals are cost-effective, but they aren’t free! Here’s what companies can offer.

  1. Cash bonus: Keep it attractive and inclusive. That is, the amount should incite action, and it may be beneficial to open the program up to all levels of employees, be it executives or interns.
  2. Non-cash rewards: Incentives such as a ‘paid vacation’, ‘raise in seniority level’, ‘public recognition’, or ‘dinner with the leadership’ can work better than cash equivalents. They build the referrer’s interest in the company and strengthen the company culture

Keep it simple

Devise a referral program that does not have too many terms and conditions. If it is overly complicated, employees will not participate as eagerly. Moreover, create a straightforward process for candidates to be referred: an online form is great. If the referral program can integrate with social media, even better!

Question and respond

Employee referrals are no magic handshake. They don’t have to work: they can fail! Because the quality of the hire depends on your current employee’s experiences with your company and with the candidate, it can be beneficial to get some data on this during the referral process. This will help sift high-quality referrals from those of a lesser grade.

On gaining a referral, respond to the candidate and referring employee promptly. This keeps all parties interested and the program rolling. A quick response gives the candidate the preferential treatment they may expect. Updates to employees tell them their work is valuable.

Employee referrals are extremely valuable, but cannot be the sole plank. They can suffer from low data and a lack of diversity. Ideally, employee referrals should complement other recruitment methods. For instance, when you partner with Talent500, you get access to over 200,000 pre-vetted professionals gunning to fill the ranks at quickly-growing start-ups and Fortune 500 companies. Our AI-powered tools provide access to 5x faster hiring, data-driven profile matching, and multichannel sourcing.  Schedule a consultation and learn how to put top-draw talent from renowned talent hubs across the globe within your reach today!


Vikram Ahuja

Vikram Ahuja

A serial entrepreneur and co-founder of Talent500. Enthusiastically strives to expand businesses across multiple domains by bringing creativity to the table. Zealous about pursuing ventures at the intersection of art, technology, and business. An award-winning short film-maker, and well-traveled theatre-performer. Took part in Google's global Daydream Impact program, which promoted the use of Virtual Reality for impact-based stories.

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