Even though there are many reports about high unemployment I want to tell you that hiring is still taking place. I always tell my clients that one of the most cost-effective ways to recruit is via an employee referral program.
If you are considering adding an employee referral program, let me give you some thoughts to contemplate:
Referral bonus amounts need to be significant. If for example your referral bonus is $75, than I need to tell you that you need a reality check. The bonus has to be meaningful if you want your employees to share with prospective candidates how great your company is and why they should work for you. How much is meaningful? We use metrics in human resources so I would calculate your cost per hire and use that as your guide. The formula to calculate cost per hire which I use is:
1.10 Number of Hires
For example: My consulting firm estimates $7000.00 to hire a Product Manager in your company. Your company could offer a referral bonus of $2500.00 and still save money depending on other costs. In addition, you get the added benefit of increased employee engagement in the recruiting process. The referral award needs to be in proportion to the cost you would pay for the employee search.
I also believe that companies should limit the waiting period for paying referral bonuses. I believe it should not be longer than two months. The employee has provided your company with a candidate and the responsibility for selection and retention lies with your organization and not the employee. The manager would now be responsible for the candidates retention. Why would an organization make their employee wait for their referral bonus? If your new hire leaves your employ after four months then the issue lies with your manager and your onboarding process and not with the employee who originally referred the candidate.
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