A Guide to Building an Employee Referral Program

Feb 29, 2024

5 min read

Have you ever wondered how to attract and hire the best talent for your company without spending a fortune on advertising and recruiting agencies? If so, you’re not alone. As Talent Acquisition Specialists, we know how challenging and costly it can be to find and retain qualified candidates in a competitive market, which is where a well-designed referral program can come into play.

But what does it take to develop a successful referral program? In this article, I will share some best practices and tips to help you design and implement it for your company.

Why Referral Programs Matter

Referrals are not only a source of quality candidates, but also a way to speed up your time to hire new talent, and improve the brand awareness and reputation of the company.

A referral program increases retention, and engagement, reduces the cost per hire, and contributes to fostering a more robust organizational culture and diversity.

Think also about the hard-to-fill roles, such as developers or C-suits positions, a referral program can help us bring people to the team with superior skills and experience. Why? Because these candidates come recommended by colleagues who understand the job and the company culture inside out.

Define Your Goals and Metrics

If you plan to create the referral program from scratch, start by identifying the goals you want to achieve and the metrics to measure them, and communicate the expectations and requirements with managers or founders to get approval. Some of the goals may be: 

  • Lower hiring costs and time

  • Higher retention and engagement rates

  • Better cultural fit and diversity

  • Increased brand awareness and reputation

Next Step: Data Collection

Follow a systematic and data-driven approach. Start by gathering data from your hiring process, the market, and competitors to help you understand the current situation and the opportunities for improvement. Some examples of sources and methods are:

  • Analyzing the hiring data from your ATS, such as the number of applications, interviews, hires, and turnover, by source and role

  • Conducting a benchmarking analysis of the referral programs of other companies in our industry and region, using online research and reports

  • Gathering feedback and insights from other TA Specialist and HR professionals on how they deal with referral programs, what challenges they face, and what best practices they follow

After collecting and analyzing the data, you can create a presentation to share with the stakeholders, such as the senior management, the hiring managers, and the CEO, guiding them through the importance and the benefits of implementing a referral program. To support you in the presentation, include some examples and success stories.

Explain what a referral program is, how it works, and the best practices and tips to make it successful. Based on the main goal you want to achieve, provide a structure and a plan for your referral program, and show the metrics you will use to measure your success once implemented.

Type of Rewards

Many programs include some kind of incentive to thank your employees for referring more people. Share your idea of how to reward them for making referrals. You might consider offering a mix of incentives such as:

  • Cash bonuses

  • Gift cards 

  • Extra vacation days 

  • Charitable donations 

  • Experiences like: cooking classes, wine tastings, or concert tickets

  • Discounts on some platform

  • Company gadgets 

And…Recognition! People want to be recognized for what they do. Use your Internal Channels, Newsletter, or Town Hall meetings to thank employees for making referrals, at least once yearly. 

How to Refer 

Define how to make it easy and convenient for employees to make referrals and for candidates to apply and get hired. You can integrate the referral program with your ATS and the career site so that candidates can apply directly from the referral link and have their information stored and updated automatically. Assign a recruiter to keep everyone in the loop and inform the employees of any progress in hiring the candidates they refer.

Alternatively, you can create a specific landing page dedicated to the Referral Program. 

Promote Your Referral Program

Get employees in the loop about how to submit referrals and how to contribute to them. Once you have defined your Referral Program and how it works, craft a “Referral Toolkit”, a guideline to share with employees that include the following sections: 

  • Introduction: Program Overview

  • Referral Submission Process

  • What they Earn 

  • Policies & Eligibility 

Share your Referral Toolkit via email or an internal communication channel. 

Every time you open a position, involve the hiring manager to spread the word within the team and remind them about the referral opportunities. 

From time to time, send an email reminder and lastly, don’t forget to include it in your Employee handbook!

How to evaluate the impact of the Referral Program

Compare the data you gathered at the beginning of the process with what you have after one year to track the progress. Establish some KPIs and metrics that can help you redefine and improve your referral program, such as:

  • Referral rate: the percentage of employees who make referrals

  • Hire rate: the percentage of referrals who get hired

  • Retention rate: the percentage of referred hires who stay with the company for a certain period

  • Cost per hire: the average amount of money spent to hire a referred candidate

  • Employee Net Promoter Score: the measure of how likely employees are to recommend the company to others


To create a successful referral program, you need to experiment and iterate. Test different elements and strategies, such as the incentives, the communication, the user experience, and the application process, and see what works and what doesn’t. Collect and analyze data and feedback from your employees and candidates and use them to improve and optimize your referral program.

Are you crafting your referral program? Let’s have a chat! Reach out to me via LinkedIn.

Your Friendly TA Ivana


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© 2023 Ivana Evola

Made with 💙 by Daniele

Let's connect!

© 2023 Ivana Evola

Made with 💙 by Daniele