Pros and Cons of Employee Referrals

Pros and Cons of Employee Referrals

Have you ever considered the option of employee referrals for your recruitment process? There are numerous ways to find the right person for an open role. From job board outreach to reviewing applications, and networking events, employers are only interested in identifying and recruiting candidates that best fit a vacant role. Looking inward is another sure way of landing your best fit. We are not talking about internal recruitment or promotions, but leveraging your employees’ connections.

Current employees are rightly positioned to recommend candidates for vacant roles. This is so because they are on the frontline daily, and conversant with the nitty-gritty of the firm, its culture, and the industry at large; hence, should be able to refer the exact type of person you require.

Employee referral entails a hiring process based on the referment of a candidate by an employee of the recruiting organization. Its degree of success varies depending on the position, industry, or recruitment process. You can do this by simply putting out the word that you are opening up new positions, and encouraging your employees to share the information with people they feel are qualified and might be interested. Alternatively, you can set up an employee referral program.


What is an employee referral program?

An employee referral program is an organized and structured company policy that employers use to request recommendations of candidates for open positions from their employees. Unlike sourcing, this is an internal mechanism employed to find and hire the best candidates from employees’ networks and is often backed with a reward system. Employee referral is deemed as one of the most productive hiring strategies. Studies have inferred that referred employees perform better on the job than those externally sourced through other means. There are a lot of benefits and downsides associated with employee referrals; we will be discussing the most prevalent of them below.


Pros of employee referrals

  1. It saves money: employee referrals will not cost your firm a fraction of what hiring a recruitment agency or a job board outreach will cost. In reality, aside from the time (and money), you will spend assessing resumes and interviewing candidates, any additional cost will be on the reward for your referrers. Of course, the reward package will have to be compelling enough to encourage your workers to participate, but it is unlikely to be anywhere near as expensive as agency fees. Remember, you are not paying for an ad.
  2. It offers qualified candidates: employees would only recommend that will not disappoint them. They equally will want an in-take that will improve their productivity and minimize their workload. Furthermore, your job posting might not cover all the bases, and may even include requirements that are not necessary for the role; This is sometimes necessary to filter out unqualified candidates. You can count on your employees to refer people who will fit into the actual role as it is, and not how it looks on a job posting.

Similarly, reaching passive candidates is difficult through normal recruitment channels. There are a lot of passive outstanding candidates out there who will not just push to get a job. By exploring your employees’ network to reach passive candidates they know, you will be tapping into an audience of great professionals you wouldn’t normally be able to find, let alone convince them to apply for the position.

  1. It increases employee retention rate: employee referrals tend to be more loyal and often stay around longer, perhaps because they are personally connected to their peers. So also, the referrer themselves may feel respected and valued whenever the firm takes their recommendation. This sense of prestige and value can motivate workers to be more dedicated and can make them stick around for a long time.
  2. It is faster: employers desire a timely but efficient recruitment process that delivers the best possible candidate. An employee referral program will give you the right candidate faster than when you go through regular recruitment channels that could take months to complete. There aren’t as many processes and bits required; you will receive your referrals immediately after a staff member identifies any.
  3. You will be reaching a wider audience: once every one of your team members starts putting the word out there about a vacant role, especially if they post it on different social media platforms, you will be reaching a wider group of candidates than a job advert will ordinarily not get to. The more people get to know about an open position, the more likely you are to find a suitable hire.
  4. Creates a team of like-minded employees: referred employees often have some kind of social connection with their referrers. Their connection is likely to be a social connection; hence they will both have a relatively similar outlook. Their interest patterns have already meshed them together as peers. This kind of bond supports better team performance than that from a potentially untested and abrasive new hire.
  5. It increases employee engagement: Research has shown that involving staff members in decision making, gives them a sense of ease to air their views and opinions on issues. This ultimately makes them care more about the firm, they see themselves as part of the bigger picture and will therefore give in their best as opposed to just showing up for work


Cons of employee referrals

  1. Increase the tendency of bias: although an employee’s motive is expected to be genuine, there are situations where a person is just interested in finding a job for a friend or getting a referral bonus; This can make you land an unqualified candidate. The referrer may presume that the referral will improve and align while on the job, if it doesn’t happen, you will be having an underperforming employee that will adversely affect your operations.
  2. Result in clique and idea stagnation: when you hire an employee’s friends or close acquaintances, it could lead to clique forming, which could potentially diminish professionalism and hurt the team. If a large percentage of your employees have similar social orientation, political views, and thinking patterns, ideas emanating from one would be agreeable to most if not all.
  3. Limits workforce diversity: employee diversity have proven to be an important variable for a firm’s productivity. But an employee referral scheme can cause a gap and can interfere with hiring diversity. An employee is likely to refer someone of the same ethnicity, experience, and work ethic; this will significantly hamper the building of a diverse talent pool.
  4. Breeds nepotism and disillusionment: current employees who are hoping to climb the ladder and fill new roles may feel threatened by an employee referral program. The position they are eying could be taken by a referred of another employee and leaving them entirely overlooked. More so, employees who don’t get referred or whose candidates turn out unsuccessful are likely to develop resentment towards their new and old colleagues and the management in some cases.



If you want to have a good and viable employee referral program, consider both the pros and cons of recruiting through referrals and set up a scheme accordingly. If you already have one and desire to improve it, seek professional input from reputable recruitment agencies. Regardless, your employee involvement in a recruitment process is key in landing the best fit for an available role.

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