Several studies have confirmed that recruiting people through referral programs pays off more than regular hiring. These programs improve applicants’ lists while reducing the hiring process time.
Employee referrals are the best way to find skilled workers who are either employed or not looking for a job but might consider it if referred.
Moreover, employee referral statistics show that people who refer others for jobs in their company can get various incentives if their candidate gets chosen.
Key Employee Referral Statistics 2023 – MY Choice
- 82% of employers claim that referrals generate the highest ROI. (CareerBuilder)
- Hiring employees via referrals is 55% faster than through career websites. (Toolbox)
- 88% of employers claim that their best above-average candidates come through referrals. (Yello)
- Employee referrals increase the odds of getting hired by 2.6-6.6%. (Glassdoor)
- 69% of employers offer referral incentives to their employees, amounting to $5,000. (FDOCUMENTS)
- Organizations with a referral program have a 46% average retention rate. (Toolbox)
- Referral programs save the company around $3,000 per hire. (Recruiter)
- New hires through referral programs add 25% more profit to their organizations than ones sourced through other channels. (FirstBird)
- Employee referrals make up a significant portion of hires, with an average of 40% of hires being sourced from referrals.
- Companies with an employee referral program see a 50% higher retention rate for referred employees compared to non-referred employees.
- Referred employees tend to perform better than non-referred employees and have higher job satisfaction.
- The cost per hire for employee referrals is significantly lower compared to other hiring methods, with an average cost of $1,000 per hire.
- Employee referrals have a higher application-to-offer ratio than other hiring methods, with an average ratio of 2 to 1.
- Companies with employee referral programs are more likely to have a diverse workforce.
- Employee referrals are also a more efficient way of sourcing candidates, as they can be screened more quickly and effectively.
- Employee referral programs can help increase employee engagement and satisfaction by offering incentives and recognition for successful referrals.
- Referral programs can also improve employee morale by creating a sense of community and collaboration among employees.
- Employee referral programs are also a valuable source of passive candidate leads, which can be used for future hiring efforts.
General Employee Referral Statistics
1. 60% of jobs are found through networking.
Although it might be common to look for a job on the big online platforms, referral recruiting is much more effective. However, don’t disregard them, but look beyond since most jobs might not be online.
2. Passive talents, who aren’t actively looking for a job, comprise 70% of the global workforce.
While looking for candidates, it’s important to remember that most aren’t looking for a job, and only 30% are active job seekers. However, they might consider your company with the right incentive or word of mouth from the existing employees. What’s more, employee referrals statistics suggest that 87% of active and passive candidates are open to new opportunities.
3. 82% of employers claim that referrals generate the highest ROI.
Because the method is cheap, relying solely on word-of-mouth marketing, effective referral recruiting reduces employers’ costs per hire. This method produces the highest ROI, confirmed by the Direct Employers Association Recruiting Trends survey.
4. Hiring employees via referrals is 55% faster than through career websites.
Work referral is the best option, especially for firms in highly competitive markets with strict schedules and project plans. This way, the company can fill the positions with specific requirements with adequate people while cutting costs and time.
5. 88% of employers claim that their best above-average candidates come through referrals.
In line with employee referrals statistics, candidates that are more likely to outshine others originate from referral programs. At least, that’s what the majority of employers confirm.
6. Employees hired through referrals in smaller companies stayed 122% longer.
Data from different industries and companies show that the size of a company also plays a crucial role in employee retention. This is particularly true when it comes to referral employees. Employee turnover statistics have confirmed that small and medium-size companies retain the referred and all other workers much better.
7. Employee referrals increase the odds of getting hired by 2.6–6.6%.
Employee referral statistics suggest that job interviews with referred candidates are more likely to convert into accepted job offers. On the other hand, job interviews based on college and university referrals and online applications without personal contact are less likely to have the same outcome.
8. Referrals account for more than 29% of job interview sources.
The chances of getting a job through a referral are significant, even though, as Glassdoor reports, around 42% of job interview sources are online applications. Next, college and university referrals account for 10%, followed by employee referrals also with 10%. Finally, recruiter referrals are around 9%. The least popular sources are in-person connections (8%), staffing agency referrals (2%), and other sources (4%), employee referrals statistics show.
9. 69% of employers offer incentives for referrals to existing employees amounting to $5,000.
Not all employers offer cash incentives to the employees referring new workers. Yet, the majority offer decent sums. For reference, the average employee referral bonus is between $1,000 and $5,000. Many companies offer other incentives than cash bonuses like prize drawings (54%), branded items (27%), or additional vacation days (15%).
10. Employees coming through referrals end up their onboarding in 29 days, faster than others.
New hires are more likely to finish their onboarding faster if they come through employee referrals, statistics indicate. Namely, referral employees start their jobs only 29 days after their onboarding, while others take much longer. For example, career site candidates begin after 55 days, while job board candidates start after 39 days.
11. Referral incentive usually amounts to around 2-3% of the existing employee’s salary.
The costs of recruiting agencies are much higher than job referral bonuses. Namely, the average costs of recruiting agencies are about 20-30% of employees’ annual compensation, as opposed to only 2-3% for a referral incentive, employee referral statistics confirm.
12. Referrals comprise 30-50% of all new employees in the US.
Based on HR statistics, US referral employees account for nearly half of all new employees. Moreover, a candidate invited for an interview has a 40% higher chance of receiving an offer than other potential employees. So referral candidates are four times more likely to get a job than those who applied through company recruitment websites.
13. Most hired employees through referrals are salespersons.
In line with employee referral statistics, workers that are mostly hired through this method are salespersons. First, it’s important to know that nearly 50% of college graduates work in sales, although 55% don’t have the necessary skills for the job. Therefore, the annual turnover in sales is between 25% and 30%. Hence, referrals have an important role in getting skilled candidates.
14. Only 6% of employees submit a job referral for incentives.
As employee referral statistics show, despite being an important tool to motivate employees, incentives are the main driver for only several percent of workers. Instead, 35% do so to help their friends, followed by 32% who want to help their organizations. Finally, 26% only want to be recognized as valuable colleagues.
15. Nearly two-thirds of referred employees further recommend a minimum of one person to their new company.
This leads to a continuous circle that helps build a top-notch team of skilled workers. Work referral, in this sense, becomes the key ingredient in building a high-performance work culture since top performers prefer to work with others alike.
16. About 25% of organizations are either switching or experimenting with external rewards for their referral programs.
Typically, employers offer cash or non-cash incentives as part of their employee referral programs. But lately, a significant number of companies have started offering external rewards. These are usually non-cash and lower than the regular ones. It is so because of the external rewards’ lower conversion rate from referral to hire and finding a simpler way to manage payouts and taxes in other countries.
17. Employee referrals boost the company’s brand.
Job seekers always investigate the company before applying. For instance, 75% research its reputation and brand. Similarly, 83% of companies claim that an employer’s brand is vital in hiring talent. Branding statistics further reveal that 69% of job seekers wouldn’t accept a job from a company with a bad reputation even if they were unemployed. Hence, employee referral becomes a powerful tool for better employer branding.
Statistics on Employee Referral Programs
18. Organizations with a referral program have a 46% average retention rate.
According to employee retention statistics, companies with job referral programs have a 13% higher average retention rate. However, the percentage of those that use career sites is only 33%. Among other reasons, it might be the more precise picture the new employees have thanks to the referring ones. In other words, these hires have someone ‘on the inside’ to guide them. As a result, 47% of referred employees stay with a company for over three years. Alternatively, only 14% of those coming through job boards remain that long.
19. Referral programs save a company around $3,000 per hire.
Based on employee referral program statistics, recruiting people with this method costs only around $1,000. On the other hand, the traditional recruitment process costs between $4,285 and $18,000 per hire. Moreover, if a position to be filled is somewhat competitive, with other companies offering the same or better conditions, the costs are even higher.
20. Nearly one-third of companies plan to launch their referral programs using third-party software with social referral features.
Looking at the employee referral program benchmarks, HR professionals reached an important conclusion. Companies using software with social referral features tend to have much better results. According to employee referral statistics, 63% of companies rating themselves as most satisfied with their referral solutions already use third-party software. At the same time, they recognize the importance of maintaining high employee engagement levels via various engagement tools.
21. New hires through referral programs add 25% more profit to their organizations than the ones through other channels.
New employees hired via these programs contribute in multiple ways to the company. First, statistics on the success of employee referral programs show that they are very profitable to the company. These employees are by a quarter more profitable than hires from other channels.
22. 75% of organizations report adopting a semi or fully automated referral program.
The companies that have automated or semi-automated processes in place claim to have increased their employee referral rates. LinkedIn (with 83%) seems to be the preferred social media platform among the companies that integrated social media with referral programs. These organizations reported hiring 72% more candidates each year compared to those that don’t use them.
23. Google started offering trips to Hawaii to the employees who refer candidates rather than $1 million cash bonuses.
According to statistics on employee referral programs, Google has found another way to provide incentives to their workers. So instead of offering $1 million cash bonuses, they started giving out Hawaii trips. Google’s data shows that it makes them happier than cash incentives.
24. By the end of 2017, 40% of Digital Ocean’s employees came through referrals.
This was thanks to their well-established employee referral program. Benchmarks show that it’s one of the best, having found a new tactic to engage their employees to refer only the best candidates. In line with employee referral statistics, they hired almost half of the new employees through it in its first year. Namely, they started offering a $3,500 referral bonus plus a $1,500 charitable donation paid on the employee’s behalf. By serving a good cause, they have motivated their employees even further.
25. Deloitte is now sourcing over 49% of its new employees through the referral program.
Statistics on the success of employee referral programs are best shown with examples of the actual companies. For example, Deloitte launched a new career landing page for the alumni and the current workers to make direct referrals. They promoted the page and, as an incentive, offered $3,000 for managerial and $1,000 for other positions. It’s evident from the statistics above that they reaped nothing but success.
26. Salesforce paid its employees over $5.5 million in referral bonuses.
The US cloud computing giant has a reputation for giving generous rewards to employees for solid referrals. Based on employee referrals statistics, not only do they pay when a referred candidate is hired, but to the employees volunteering in the community. Furthermore, the company finds new ways to challenge the workers who have spent 18 months without a promotion. On top of that, the company organizes Recruitment Happy Hours, where employees can invite the people they want to refer to meet the recruiters informally.
Benefits of Employee Referral Programs
- Employee referrals have a much higher conversion rate compared to other sources of candidates. (SHRM)
- Employee referrals tend to stay with the company longer than candidates hired through other methods. (Jobvite)
- Employee referrals often have a faster time-to-hire, which can save a company significant resources. (Jobvite)
- Companies with employee referral programs see a higher employee engagement and satisfaction. (Jobvite)
- Employee referrals can bring in a more diverse pool of candidates, which can lead to a more innovative and inclusive workplace. (Glassdoor)
Key Components of Employee Referral Programs
- Setting clear guidelines and instructions for employees on how to refer candidates. (SHRM)
- Offering incentives for employees who refer successful candidates. (SHRM)
- Making the referral process as easy and streamlined as possible. (SHRM)
- Encouraging open and ongoing communication between HR, managers, and employees to ensure the success of the program. (SHRM)
- Regularly assessing and updating the program to meet the changing needs of the company. (SHRM)
The Future of Employee Referral Programs
- The use of AI and machine learning to automate and optimize the referral process. (Forbes)
- The integration of social media and other online platforms to expand the reach of referral programs. (Forbes)
- The use of gamification techniques to increase employee participation and engagement. (Forbes)
- The increased use of data and analytics to measure the effectiveness of referral programs. (Forbes)
- The rise of remote work leading to the creation of virtual referral networks. (Forbes)
Employee Referral Industry Case Studies
- Google saw a 15% increase in employee referrals after implementing a referral bonus program. (Forbes)
- HubSpot reported a 50% faster time-to-hire for referred candidates. (Jobvite)
- Dropbox saw a 60% increase in employee referrals after introducing a referral program. (Glassdoor)
- Salesforce reported a 40% lower cost-per-hire for referred candidates compared to other sources. (Jobvite)
- Zillow reported a 33% increase in employee referrals after introducing a referral program with generous bonuses. (Glassdoor)
Implementing Employee Referral Programs in Your Business
- Clearly communicating the goals and objectives of the referral program to employees. (SHRM)
- Offering a user-friendly referral system that makes it easy for employees to refer candidates. (SHRM)
- Encouraging open communication and feedback between HR, managers, and employees. (SHRM)
- Offering competitive incentives for employees who refer successful candidates. (SHRM)
- Regularly assessing and updating the program to ensure it meets the needs of the company. (SHRM)
The Bottom Line
It’s more than evident from the employee referrals statistics above that this is a bulletproof way to hire skilled candidates and benefit as a company. Aside from that, you will save money and time in the process. Furthermore, it’s also the fastest way to bring pre-qualified workers to the company. Not to mention that it works three ways: besides the company, the potential candidate also benefits from the referral, while the employee who referred them receives a financial incentive. In the end, everyone is happy.
Referral programs have excellent conversion rates from interview to hire. These workers stick with the organization the longest and drive the highest hires. Yet, they are still underutilized — employee referrals source 30% of the overall hires. Next on the list are internal moves (21%) and recruiter-sourced hires (19%).
According to statistics on employee referral programs, these are among the most cost-effective and efficient tools for HR. Although the smallest number of applications to a job posting comes from internal referrals, at the same time, it is the source of the largest number of hires. Among other HR tools, employee referral software has also proven to be an efficient recruiting instrument for marketing and sales positions.
Referral programs have contributed to reducing the hire time by 50% compared to the hiring time from the company’s career page. In the US, referrals make up about 30-50% of hires. Also, they are of critical importance for employee engagement. They raise the attachment between the brand and worker, thus fostering employee engagement, statistics confirm.
Employees hired through these programs stay 70% longer than regularly hired candidates, according to employee referral statistics. For instance, both referral hires and referring employees remain in the company between 25 and 35 months approximately. On the other hand, non-referred employees stay in the company for up to 21 months. Further, in companies with 1-10,000 workers, this time is much longer (up to 50 months) for referred employees.