How much do companies pay for a successful employee referral?

"I have some bad news. Employees in the labour market no longer believe in companies and in corporate communication. The opinion of the people who work for the company is much more credible for them. They are the number one source. That's why the market of referral systems is so important. Also, this is why we have to focus on what colleagues think about us and what they say about us in their circle of acquaintances ", Gábor Toldi started his presentation at the recruiTECH conference.

Gábor Toldi noted that in a candidate- and shortage-driven job market, it is necessary to address passive job seekers who are not looking for a job but would be open to change if offered a suitable position. Referral systems can multiply recruitment capacities. On average, an employee has 600 contacts on social media. If they share a position on social media or talk about their workplace to their friends at a sporting event, it has a huge value," said the recruitment expert.

Companies pay on a contingency basis and it may not be enough

The speaker also pointed out an interesting counter-effect. The employee is able to recommend, share positions, and tell people he knows about job opportunities, but he/she has no effect on getting candidates hired and surviving the probationary period, which is the only time the referrer gets paid. Gábor Toldi, therefore, argued that the company should in some way value and reward the activity of the referrer anyway.

Employee satisfaction is also related to the willingness to recommend. If it is a bad job, employees will flee, let alone recommend. However, those who come with a referral are, in our experience, more likely to stay longer and less likely to quit early than those who come through other channels.

5 challenges for employers

Gábor Toldi mentioned five challenges that organisations are facing.

1. How to get colleagues to share their positions on social media? Sometimes the employee attitude comes up that "the private social media page is mine, let me not share company news."

2. Yes, it means a lot of administration: a lot of information to deal with: who recommended whom, for which position, how much the referral bonus is when the referral bonus is due and all of this has to be passed on to payroll. Especially when 150 people in an organisation of 1000 people are actively referring.

3. Measuring effectiveness. What every company knows: how many employees have been paid a referral bonus, and what percentage of new hires came with a referral? It would be important to measure, but few do: how many active referrers the company has, which departments are the most active, how many CVs a colleague recommends, and the quality of those CVs.

4. GDPR: compliance with data protection rules. We act legally when the referring employee asks for consent from the recommended person to use his CV and personal data in the application process. And the referrer must delete the CV(s) from his/her computer after sending it to the company.

5. Internal communication. It is inefficient to send employees the same referral email with current positions. "This will result in email blindness. Instead, think in terms of campaigns, we could playfully introduce them, advertising a competition between employees and managers."

What do companies pay?

DTC Solution surveyed more than 200 large companies in January and February about their referral practices. Let's look at some of the results, and benchmark figures.

In physical jobs, employers pay a bonus of between HUF 100,000 and 150,000 and HUF 150,000 to 200,000 in intellectual positions if the employee is still working there at the end of the probationary period. In blue-collar jobs, there is a co-movement between the amount of the referral bonus and the number of referrals, while there is no co-movement for white-collar jobs.

In the Hungarian corporate environment, 12-15% of new employees come by referral. In physical jobs, the proportion is higher, at 16-20 percent. Blue-collar workers are more active referrers. This may be because it is easier to refer for low-skilled jobs and such bonuses are important for lower salaries. "We're not looking for „survival recommenders” and we don't want to turn employees into recruiters. The goal is whether they have a relevant colleague in their network of contacts who would be an interesting candidate for the company" - says Gábor Toldi.

Some companies have a 40 percent ratio, but 25 percent might be a realistic target. If the ratio is below 25 percent, there is room for improvement, but a good internal communication campaign is needed to improve.

Advice for employers

- Make the referral system as simple as possible for referrers
- Segmented communication, give feedback to recommenders
- Engage with candidates. If the selection process is prolonged and no feedback is given to them, they will complain to the recommender, which can reduce the recommender's motivation.
- It is also worth involving managers in communication, providing information through multiple channels and using creative solutions.
- Success does not depend on money, but on process, communication and activity.
- Don't just reward results, reward activity in some way. It will also make the recruiter's job easier.