What Are Employee Referral Programs And Are They Worth It?

Human Resources

Without a doubt, we live in difficult times and finding amazing people to join your company can sometimes feel like a losing battle. Something we found at NoHQ, is that employee referrals can be extremely beneficial in getting the right people into your business. 

“Good people tend to know other good people”

Heard of that quote before? Well, that’s the key concept of referral programs. So, without further ado, let’s jump right into what those are, their benefits, importance, and look at some great examples of how you can develop one that is appropriate for your company. 

What is a referral bonus?

Referral bonuses are usually incentives provided to employees who refer a candidate to a job opening. The incentive package is determined by the company and often varies depending on the business field, the position that needs to be filled, and the type of bonus. 

To find more great tips on running remote companies, check out our articles

Examples of employee referral bonus programs

Now that we have examined the essentials of referral bonus programs, let’s have a look at some amazing cases of how other companies apply them.  

Fiverr’s gamification method 

What better way to stimulate your employees to refer quality candidates than adding a pinch of good-old competitiveness? 

This is what the freelancing marketplace Fiverr did in order to increase its job shares. What Fiverr did was use software that gave their employees credits every time they referred an applicant. The platform also sent notifications about the recruitment status of candidates, making employees aware of their own progress. 

Fiverr’s employees would, later on, receive gifts based on the credits/points they earned for their referrals. 

Salesforce’s Happy hours 

One of the most successful case studies on this topic, with more than a 50% success rate, is the cloud-based software company, Salesforce. They organize events and encourage their employees to bring individuals they wish to refer. This way, potential candidates can meet the Salesforce recruiters in person, yet in a more informal setting.

Another takeaway is their reward system. The software company offers gifts to every employee that refers family or friends, regardless of the outcome.

PURE – fast and efficient

As we mentioned a few times already, timing is crucial. And the insurance company PURE is well aware of this!

Why is a referral bonus important?

Now that we’ve covered the key concept of referral bonuses, let’s have a look at just some of their perks.

  1. It can fill roles quickly 

Talking about easing the recruitment for remote jobs – it’s a proven fact that referred candidates are hired 55% quicker than those that use traditional methods. This is because people often surround themselves with individuals with similar interests.  

  1. Retention rate is typically better

Retention rate is often higher among referred employees. In fact, referred employees remain in a company 70% longer than regular hires

Taking your employees’ recruitment recommendations into account will make them feel valued and their advice appreciated. You can consider this a strong win. Not only do you get a skilled addition to your organization, but you will also receive a higher level of dedication from existing employees. 

  1. It can help get higher-quality candidates 

Research shows that 82% of professionals rate referral programs to be more ROI effective than other sourcing options. 

This comes as no surprise because your employees know the organization best. They know the goals of the business, and they often know some of the best people that can help you get there. This is another factor that makes referred applicants higher-quality applicants. 

What types of employee referral bonuses are there?

As you probably thought, there are many ways you can offer rewards to your employees in return for referring qualified candidates, but here are three of the most common:

  • Cash referral bonus – Financial compensations are the most common form of referral bonuses and can vary a lot, depending on many factors regarding the position. Although cash referral bonuses are a preferred form of bonus, research shows that being transparent and open with everyone about the amount being offered is the most effective approach.  
  • Paid time off another budget-friendly (if planned properly) and popular referral bonus is offering increased paid time off. Something to keep in mind as a remote company, is that paid time off differs based on country of residence. For instance, European countries often offer their employees more paid days off compared to the US. While more PTO might be appreciated by these employees, other referral bonuses might be a more viable option.
  • Diversity referral bonus as mentioned earlier, referral programs are an easy and efficient way to lure talent. However, this can easily lead to onboarding individuals with similar backgrounds, mindsets, and even ethnicity.
    Adopting diversity policies throughout the organizational structure can allow your company to have access to a bigger scope of skilled talent and bring a different approach and work ethic. A great start will be if you implement a percent-focused bonus that will stimulate referrals of minority background candidates.
    The insurance giant knows exactly how to get new members, and they do it as new hires walk through their doors – literally. On their first day at work, employees are asked whether they know someone who is qualified to join the company, whilst being introduced to the incentive program. 

How to start employee referral bonus programs?

“But how do you organize such a thing?” you might ask. Well, let's have a look at 6 major points that you need to cover to ensure it all goes smoothly: 

  1. Get management on board

Always have top management as your first stop. By presenting your ideas to your managers, you aren’t simply introducing them to the idea. You are also allowing them to contribute to the project with their broad expertise. 

Furthermore, including management will also help spread the word internally, and will further stimulate employee participation. 

  1. Explain job requirements 

Simply – transparency. Be clear. Be simple. Inform. 

This is also something that would save you a lot of time. Describe the characteristics of the “perfect” persona that would best fit the position you’re searching for. Keep in mind that, often times, employees can misunderstand the specifics of certain positions. So, you need to use simple and clear language in emails advertising the referral bonus opportunities.

  1. Determine what you need 

Three of the most important factors you need to take into account before launching a referral program are money, time, and people. And here is where to start:

  • Plan budgeting in advance – have all possible extra costs in mind. You can easily keep track with the help of a simple spreadsheet.
  • Have the right answer to “How long?”. Make sure you are ready for unexpected changes. Have the whole program planned to the very last minute. 
  • Know your people – who is doing what? Ensure everyone’s got a responsibility, track progress, and regularly check with everyone. 
  1. Metrics

What would this referral program bring in the long run? What is the goal? The answer to those questions will shape and refine the entire scheme. 

But to get there, you need to know what to look out for, so here’s a list of metrics you will need:

  • Total referred applicants; 
  • Total of hired referred applicants; 
  • Number of referral applications per position or department;
  • Referred employee retention rates
  • Referred employee performance rates.
  1. Prioritize communication with referred candidates 

Even if the candidate is not the “perfect fit” for the position, we highly advise you to keep them updated throughout the recruitment process – provide feedback. Something you could do is ask for feedback regarding the employment process – there is always room to improve. Many HR professionals recommend treating referred applicants with care, as those individuals have already established strong connections with your employees. 

Sure, there might be better-qualified candidates, but ensure you leave it on friendly terms.

  1. Announce your ERP and recognize successful referrals 

Remind your employees of the referral programs, inform them about future open positions, present positive results from previous campaigns, and stimulate people to take part in the process by highlighting the benefits. You can do so by sending out company bulletins, distributing fliers, and taking advantage of the power of social media. 


Referral bonus programs are a great way to ensure the quality of people you employ and an excellent tool to decrease recruitment expenses. As we already saw, however, there are many forms of referral program, and not all will fit certain companies. This being said, make sure you experience in order to find exactly what stimulates and encourages your employees. By implementing different methods, even failing, you get the chance to find the best approach to apply in your company. 

From interesting guides on hiring great remote talents to a highly curated toolkit, NoHQ is a great one-stop for helping remote businesses walk the sometimes ‘bumpy ride’ to success. 

Exclusive content right in your inbox

Our newsletter is sent every other week to show you how to build a happy, healthy and efficient remote team.

Build productive remote teams

Actionable advice and guides on how to build an effective remote team, sent to your inbox twice per month.

By clicking "subscribe" you agree to receive emails from NoHQ.

Subscribe to our newsletter

A collection of resources, all around a certain remote work topic, sent every other week.

Still on the fence? Read

© 2024 NoHQ. All rights reserved.