Pros and Cons of Offering Referral Bonuses

A referral bonus is an incentive for employees to recruit candidates in their networks. The bonus rewards current employees with cash, prizes, or something else if they recommend a candidate who is ultimately hired. When used as part of an employee referral program, the incentive can be helpful, but there can also be drawbacks. If you’re unsure whether to offer referral bonuses as part of the hiring process, weigh the pros and cons to help you come to a decision.

Benefits of Referral Bonuses

A major advantage of the incentive is that you can get a recommendation from a top employee whose opinion you value. If they think that the referral would fit well in the culture and be a great addition to the workplace, that may well be the case.

Furthermore, the retention rate is likely to increase as the referral integrates nicely into the organization. The existing relationship between the new hire and the referring employee can also make for a stronger team.

Also, involving current employees in recruitment, a vital part of an organization, empowers them, especially if the referral ends up getting hired. Finally, you might save money by using referral bonuses rather than paying for ads to draw top talent.

Potential Issues

As with anything, there are possible downsides. For example, there is a risk that the referral is not someone who the existing worker knows well and may not be a hard worker or fit well into the culture.

Also, if a candidate is not chosen, the worker who referred them to you may be offended. That may create resentment that builds over time and ultimately leads to them leaving the organization.

If the hired referral has a falling out with your employee, that too can have adverse effects. It could lower both of their work performances and create adverse feelings toward the company. On the other hand, if they remain friendly and either of them decides to leave, you risk losing both.

Using a Range of Tactics

It’s important to understand that referral bonuses are not the only solution. There are many ways to source quality candidates, and an employee referral program that includes bonuses can be one piece of it.

Another way to source candidates is to reach out to local organizations and colleges to connect with potential top talent. Start to build relationships with the communicate now to get ahead of the competition. Also, consider engaging on social media platforms with local groups that could be brimming with amazing candidates.

Concluding Thoughts

The decision of whether to include referral bonuses in your hiring scheme is easier when you know the pros and cons, as outlined above. If you decide to move ahead with incentives, be sure to share employees’ referral successes with the company by email to encourage them. When it’s time to start sourcing the best talent, whether you choose to offer bonuses or not, post the job to your intranet, website, and elsewhere quickly and seamlessly with Talcura’s automated recruiting software.  

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