How to set up a successful referral program?

Let’s understand what a referral program is first. A referral program is a way for companies to hire employees referred by an existing employee. It encourages accountability for the existing employee to recommend someone who will be fit for the role.

The current employees also understand the company better to know who from their acquaintance is a better fit for the company, in terms of work culture, career growth etc. Companies prefer this method of hiring because the new hire comes with a better understanding of the company and with someone they know already working in the system increases their chances of not quitting too soon.

With all that understood, let’s proceed to understand how you can build an effective and successful referral program for your company

The benefits

For motivating an existing employee to provide the company with a suitable candidate there should be some benefit, Most of the companies provide a referral bonus to the employees which is either a certain percentage of the salary of the new employee, or a fixed bonus amount. A good suggestion is to add an extra day off to that bonus and It serves as a good motivation for someone to refer their friends for a role

Determine the strategic goal for the referral program

Identify the problem, recognize if you want to achieve better retention, or improve employee morale, save time, or reduce costs in hiring from external sources, or build a bank of suitable passive candidates for future vacancies. You can start by prioritizing your goal and make a strategy that suits it the best. For eg. If your priority with introducing a referral program is to improve new employee retention you can add a clause to the referral bonus which only allows the transaction of bonus to take place after the new employee has served their probation period.

Make the participation simple

While a well documentation of referrals is the best scenario, a lengthy form for this documentation may discourage the employee to refer a candidate. An email may not be the most efficient way to keep a track of the referred candidate for the HR managers involved in the process. The middle ground where it is easy for the employees to refer a candidate and easy for the HR managers to keep the database organised is to take support from IT and develop a section in SAP or similar employee operations software where the employee can fill up minimal information and attach the candidates resume. This will be data that’s easy to access for the recruitment manager in the future.


Timely communication emails for the available vacancies in the company can be very helpful for employees to locate their contacts as referrals. The mid-level managers of the respective department can keep checking with their immediate teams if they can refer someone. Keeping employees updated on the available positions is important, otherwise this not being an active part of the employee’s KRA can skip their mind.

Shrofile is a team of experienced HR managers backed with new age technology to help you in developing the perfect referral program for your company. The referral programs need customization from industry to industry, and we at Shrofile expertise in customizing our solutions that serve the best interest of your company. You can contact us by clicking on the contact us tab, we look forward to your queries.

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