How To Draft An Effective Employee Referral Policy

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

Creating an effective employee referral policy is a crucial element for businesses seeking to recruit top talent. As the Genie AI team understands, having well-crafted policies in place can protect employers from potential legal risks and offer invaluable benefits. Here, we explain why having an employee referral policy matters and how you can use it to your advantage.

Employee referral programs are a cost-effective way to find suitable job candidates. By leveraging the existing network of employees to identify potential hires, employers can save time and money while also tapping into a pool of possible recruits that are familiar with the current staff. It has been proven that such programs yield higher quality hires than other traditional recruitment methods, as referrals tend to be more reliable sources of information.

In addition, having a clear policy in place provides employers with legal protection against any disputes that may arise from unsuitable applicants referred by employees. Moreover, companies can track their recruitment efforts more systematically and ensure only the right people are being considered for certain positions.

On top of these advantages, employee referral policies encourage loyalty among existing staff members. Employers who reward employees for referring qualified candidates can create an atmosphere where workers feel appreciated for their efforts and promoted within the company culture.

In summary, establishing an effective employee referral policy is paramount for businesses wanting to recruit top talent in a cost-effective manner while protecting themselves from potential litigation risks - not to mention creating a sense of loyalty among their staff members! The Genie AI team provides free templates so anyone can quickly draft high quality legal documents without paying hefty lawyer fees - read on below for our step-by-step guidance and find out how you could access our template library today!

Definitions (feel free to skip)

Employee Referral Policy: A set of rules, expectations, and rewards for encouraging current employees to refer qualified candidates for open positions within the organization.

Incentivize: To provide motivation or encouragement, usually in the form of a reward.

Recruitment Costs: The expenses associated with sourcing and hiring new employees.

Roles and Responsibilities: The tasks and duties that individuals and teams are required to fulfill.

Criteria: The standards or requirements used for judging and evaluating something.

Rewards: Something given or received in return for good behavior or success.

Recognition: Acknowledgement or appreciation of someone’s efforts or accomplishments.

Communication Plan: A strategy for delivering a message or information.

Marketing Plan: A plan for promoting, advertising, and selling products or services.

Tracking: Monitoring, recording, and analyzing data.

Metrics: A set of measurements used to evaluate the success of an organization or process.

Onboarding: The process of introducing and assimilating a new employee into an organization.

Contents

• Defining the purpose and goals of the policy
• Outlining the roles and responsibilities of employers, recruiters, and HR managers
• Setting expectations for employees participating in the referral program
• Establishing criteria for successful referrals
• Outlining the rewards and recognition for successful referrals
• Defining the process for submitting and evaluating employee referrals
• Establishing the timeline for submitting and evaluating referrals
• Establishing the review criteria for referrals
• Establishing a compensation structure for successful referrals
• Determining the incentives for successful referrals
• Defining the timeline for payment
• Creating a communication plan to promote the program
• Developing an internal messaging strategy
• Creating a marketing plan to promote the program externally
• Developing a system for tracking referrals and outcomes
• Establishing a system for tracking the source and outcome of referrals
• Developing a system for tracking the success of the program
• Reviewing and refining the policy on a regular basis
• Establishing a timeline for reviewing and updating the policy
• Designating a team or individual responsible for policy updates
• Developing an onboarding process for new employees referred through the program
• Establishing a timeline and process for onboarding new hires
• Developing a system for tracking new hire satisfaction
• Developing a system for collecting feedback and measuring the success of the program
• Developing a system for collecting feedback from employees and employers
• Establishing metrics for measuring the success of the program

Get started

Defining the purpose and goals of the policy

• Identify the purpose of the policy, such as encouraging referrals and hiring quality candidates.
• Establish goals that you would like to achieve with the policy, such as reducing recruitment costs or hiring more diverse candidates.
• Consider any legal implications of the policy and how it might affect your employees.
• When you have a clear purpose and goals for the policy, document it in a written policy.

When you have finished defining the purpose and goals of the policy, you can move on to the next step.

Outlining the roles and responsibilities of employers, recruiters, and HR managers

• Define the roles and responsibilities of employers, recruiters, and HR managers in the referral process.
• Decide who will approve employee referral requests.
• Establish the role of each in the recruitment process.
• Establish a clear communication process between the three entities.
• Create guidelines for setting the compensation for successful referrals.

You can check off this step when you have a clear understanding of the roles and responsibilities of employers, recruiters, and HR managers in the employee referral process.

Setting expectations for employees participating in the referral program

• Clearly define the expectations of employees participating in the referral program
• Ensure that employees understand the potential rewards for successful referrals
• Educate employees about the referral process and their role in it
• Establish a timeline for when referrals should be submitted
• Explain the consequences for submitting inaccurate or incomplete referrals
• Outline any other guidelines or rules pertaining to the referral program

When you have established expectations for employees participating in the referral program, you can check this step off your list and move on to the next step.

Establishing criteria for successful referrals

• Define the qualifications and criteria that a referred candidate must meet in order to be hired
• Identify the skills and experiences that are necessary for the position and make sure that they are included in the criteria
• Establish a timeline for the referral process, including when the referral should be made, when the referral should be reviewed, and when the final decision should be made
• Outline the responsibilities of the employee and the recruiter in the referral process
• Set the standards for how referrals should be handled and communicated
• When the criteria is determined and all guidelines are set, update the employee referral policy accordingly

Once the criteria for referrals has been established and outlined, the next step can be completed.

Outlining the rewards and recognition for successful referrals

• Decide on a monetary reward, gift card, or other type of reward to give successful referrers.
• Set criteria for how much the successful referrer receives depending on the type of job referred and other conditions.
• Make sure to explain how taxes are handled for the rewards.
• Decide on non-monetary rewards, such as recognition at an event, promotion opportunity, or other reward.
• Set criteria for how much the successful referrer receives depending on the type of job referred and other conditions.
• Outline any other rewards and recognition you’d like to offer successful referrers.
• When you have outlined all the rewards and recognition you’d like to give to successful referrers, you can check this off your list and move on to the next step.

Defining the process for submitting and evaluating employee referrals

• Outline the process for submitting employee referrals
• Employees should provide their referral via a designated form
• Employees should include all relevant details such as the referral’s name, job title, and contact information
• Establish criteria for evaluating referrals
• Ensure the referral meets the requirements of the position
• Consider the employee’s past job performance
• Determine the level of technical skills and/or experience needed
• Set up a review panel to evaluate referrals
• The panel should consist of HR, the hiring manager, and other stakeholders
• The panel should meet regularly to review and discuss referrals

You can check this off your list and move on to the next step when you have outlined the process and criteria for submitting and evaluating referrals, as well as established a review panel to evaluate referrals.

Establishing the timeline for submitting and evaluating referrals

• Set a deadline by which employees must submit referrals in order to be considered for the position.
• Agree how long the selection process will take and how soon the successful candidate should start.
• Ensure that the timeline is fair to both the candidate and the business.
• Consider how many rounds of interviews should take place and how long each round should last.
• Make sure to communicate the timeline to the referring employee.
• Once the timeline is established, you can check this step off your list and move onto the next step: Establishing the review criteria for referrals.

Establishing the review criteria for referrals

• Determine the criteria for assessing referral success.
• Consider whether referrals should be evaluated on the basis of hire acceptance or job performance.
• Make the criteria for successful referrals clear to the referral source and to potential candidates.
• Establish a clear process for evaluating a referral and determining whether it is successful.

Once you have determined the criteria for assessing referral success, you can check this off your list and move on to the next step.

Establishing a compensation structure for successful referrals

• Outline the compensation structure associated with successful referrals
• Establish the criteria that must be met for the referral to be considered successful
• Specify the amount of compensation to be given for successful referrals
• Clarify how often referrals will be rewarded and for how long
• Note any additional bonuses or incentives related to referral rewards
• When complete, have the policy reviewed and approved by legal counsel
• Check this off your list and move on to the next step - determining the incentives for successful referrals.

Determining the incentives for successful referrals

• Research what incentives you can offer to employees for successful referrals
• Consider offering a cash bonus, gift cards, or other rewards
• Decide on what type of reward you will offer and the amount
• Establish the criteria for the reward
• You can check this step off once you have determined the incentives for successful referrals and established the criteria for the reward.

Defining the timeline for payment

• Establish the payment timeline for when a referred employee is successfully hired and onboarded
• Consider how long it will take to process the payment and how soon the referral bonus should be received
• Outline the conditions that must be met in order for the referred employee to receive the bonus
• Document the payment timeline and conditions in the Employee Referral Policy
• Check that the timeline and conditions are clear and reasonable
• When you have finalized the payment timeline and conditions, you can move on to the next step of creating a communication plan to promote the program.

Creating a communication plan to promote the program

• Identify key stakeholders and decision makers
• Establish an internal support team
• Create a timeline for communication roll-out
• Draft a message to promote the program
• Develop a plan to measure the success of the program
• Identify and select appropriate channels to promote the program
• Create a system to track and measure the effectiveness of the communications
• Prepare a budget for communications

Once the communication plan to promote the program is complete, you can check this off your list and move on to the next step in the process: developing an internal messaging strategy.

Developing an internal messaging strategy

• Create a list of internal departments and channels to target with referral program messaging
• Develop messaging that is tailored to each department and channel
• Identify the best format to reach each department and channel (e.g. emails, posters, intranet, etc.)
• Create a timeline of when and how often the messaging should be distributed
• Test the messaging to ensure it resonates with the target audiences

You’ll know you can move on to the next step when you have a complete list of internal departments and channels to target, tailored messaging for each, and a timeline of when and how often the messages should be distributed.

Creating a marketing plan to promote the program externally

• Identify where to promote the program (e.g. website, emails, social media, etc.)
• Brainstorm ideas for marketing the program (e.g. incentives, referral bonuses, etc.)
• Develop a timeline for when and how often materials will be released
• Draft materials and content that will be used to market the program
• Create a budget for promotional materials, if needed
• Secure approval from internal stakeholders
• Publish the program and materials

When you can check this off your list and move on to the next step: When the materials have been approved and published, you can move on to the next step.

Developing a system for tracking referrals and outcomes

• Establish a documentation system for tracking referrals and the outcomes of those referrals
• Designate a person or team to be responsible for tracking information in the system
• Decide whether to use an existing system or create your own
• Make sure that the system is secure and compliant with any relevant data privacy regulations
• Ensure that the system is accessible to all stakeholders, as needed
• Decide on a timeline for tracking information, such as weekly or monthly check-ins
• Create a way to store and access referral-related data, such as interviews, hiring decisions, and feedback

Once you have established a system for tracking referrals and outcomes, you can check this step off your list and move on to the next step.

Establishing a system for tracking the source and outcome of referrals

• Establish a system for tracking the source and outcome of referrals - this can include a spreadsheet or other tracking system that captures the source of referral, the referred candidate, their qualifications, and the outcome of their application
• Track application status, interview status, and final hiring decisions - this will help you to measure the success of the program and identify any areas where improvements can be made
• Ensure that the tracking system is secure and accessible by authorized personnel only - this will help to protect confidential candidate information
• When the system is in place and ready for use, you will be able to check this off your list and move on to the next step.

Developing a system for tracking the success of the program

• Determine the metrics and KPIs that will be used to measure the success of the program, such as number of applicants, number of hires, time to hire, and cost per hire.
• Decide which team will be responsible for tracking the program’s success.
• Establish a system for tracking the program’s success such as a spreadsheet or software.
• Monitor the success of the program regularly.

Once you have determined the metrics and KPIs, have decided which team will be responsible for tracking the program’s success, and have established a system for tracking the program’s success, you can check this off your list and move on to the next step.

Reviewing and refining the policy on a regular basis

• Assign a team to monitor the employee referral policy’s performance and effectiveness
• Have the team review and revise the policy on a quarterly or semi-annual basis
• Gather feedback from team members and stakeholders to ensure the policy is still relevant
• Ensure all changes are communicated to the team and stakeholders
• When changes are made, update the policy document and make sure it is easily accessible
• Check off this step from the list when revisions have been made and communicated to the team and stakeholders.

Establishing a timeline for reviewing and updating the policy

• Determine the timeline for reviewing and updating the policy. This could be yearly, bi-yearly, or quarterly.
• Set a reminder to review and update the policy on the timeline you have decided.
• Schedule a meeting with the appropriate stakeholders to review any updates or changes that need to be made.
• Document the timeline and review schedule in the policy.
• Once you have established a timeline and review schedule for the policy, you can check this off your list and move on to the next step.

Designating a team or individual responsible for policy updates

• Identify a team or individual to be responsible for policy updates.
• Set clear expectations and responsibilities for the team or individual.
• Establish a timeline for when the team or individual will review and update the policy.
• Provide the team or individual with the resources and access required to review and update the policy.

Once expectations have been set and resources provided, the team or individual is ready to begin reviewing and updating the policy. You can check this off your list and move on to the next step: Developing an onboarding process for new employees referred through the program.

Developing an onboarding process for new employees referred through the program

• Create a checklist of onboarding tasks for employees referred through the program.
• Identify the team or individual responsible for onboarding new employees.
• Establish a timeline for onboarding new employees referred through the program.
• Outline the paperwork, training, and other onboarding necessities for new employees.
• Create an onboarding folder for each new employee referred through the program.
• When the onboarding process is complete, you can check off this step and move on to the next.

Establishing a timeline and process for onboarding new hires

• Identify key positions for which there is a need for recruitment
• Design a timeline for the onboarding process, including when to start and finalize onboarding
• Set up a system for communication and collaboration between the new hire and the company
• Outline a step-by-step process for onboarding new hires
• Make sure the onboarding process meets the expectations of all stakeholders
• Test and adjust the timeline and process as needed

Once the timeline and process have been established, move on to the next step of developing a system for tracking new hire satisfaction.

Developing a system for tracking new hire satisfaction

• Decide on the timeline for tracking new hire satisfaction. This could be done once every three months, or every six months, depending on your company’s needs.
• Determine the questions that will be asked as part of the satisfaction survey. This should include questions about job satisfaction, job fit, overall experience with the hiring process, and any other relevant topics.
• Create a survey form that can be used to collect the feedback from new hires. Make sure the survey is easy to complete with clear instructions.
• Develop a system for gathering and tabulating the data from the surveys. This could be done manually or with a specialized software program.
• Analyze the data to see how new hires are feeling about their experience with your company.
• Make adjustments to the onboarding process or referral program as needed, based on the feedback from new hires.

Once the system for tracking new hire satisfaction is set up, you can move on to the next step in the process: developing a system for collecting feedback and measuring the success of the program.

Developing a system for collecting feedback and measuring the success of the program

• Outline the data you need to collect in order to measure the success of the program (e.g., number of referrals, time to hire, retention rate, etc.)
• Decide on the best way to collect feedback from both employees and employers (e.g., surveys, interviews, etc.)
• Set up processes to collect feedback regularly
• Develop a system to track the data gathered and analyze it as needed
• When feedback is collected, analyzed, and a system is in place to track feedback and measure success, you can check this off your list and move on to the next step.

Developing a system for collecting feedback from employees and employers

• Create a survey or questionnaire for both employees and employers to provide feedback on the referral program
• Ask employees to rate the overall quality of the referral program, the ease of use, and the responsiveness of the referral program process
• Ask employers to rate the quality of the candidates referred by the program, the timeliness of the referrals, and the overall satisfaction with the referral program
• Set up a system to easily collect the survey responses from both employees and employers
• Determine how often the feedback surveys should be sent out (e.g. monthly, quarterly, etc.)
• Develop a procedure for evaluating and analyzing survey responses to identify areas for improvement
• When the survey and feedback collection system has been set up, tested, and implemented, you can check this step off your list and move on to the next step.

Establishing metrics for measuring the success of the program

• Set measurable objectives for the program, such as number of hires, cost savings, and time to hire
• Define key performance indicators to track the progress of the program
• Establish a timeline for how often you will review the data and metrics
• Identify what resources you need to track the program and its metrics
• Analyze the data to see how the program is performing compared to your objectives
• Adjust the program and metrics as needed to meet your goals

Once you have set measurable objectives, defined key performance indicators, established a timeline, identified the resources needed to track the program and its metrics, and analyzed the data to compare against the objectives, you have successfully completed this step. You can now move on to the next step.

FAQ:

Q: How does an employee referral policy differ from an employee recruitment policy?

Asked by John on 5th May 2022.
A: An employee referral policy is different from an employee recruitment policy in that it encourages current employees to refer potential job candidates to the organisation. This can be beneficial for the organisation as it can help to reduce recruitment costs and time in finding suitable applicants. In addition, referrals from existing employees can often be a better indicator of the suitability of a job applicant than traditional recruitment techniques.

Q: What are the implications of having an international employee referral policy?

Asked by Sarah on 18th February 2022.
A: Having an international employee referral policy can have a number of implications, both legal and practical. From a legal perspective, it is important to ensure that any such policy abides by relevant employment laws in the countries in which the organisation operates. It is also important to consider any potential implications of cultural differences between countries, and how these may affect the effectiveness of the policy. On the practical side, it is important to ensure that any referral process is clear and easy to understand for employees operating in different countries.

Q: Does an effective employee referral policy require financial incentives?

Asked by David on 31st August 2022.
A: An effective employee referral policy does not necessarily require financial incentives in order for it to be successful. It is important to consider what kind of incentives would be effective for your particular organisation, and may include things such as recognition or other non-financial rewards. It is also important to ensure that any incentives are fair and equitable across all employees regardless of their role or seniority within the organisation.

Q: How can data protection considerations be accounted for in an employee referral policy?

Asked by Jessica on 27th June 2022.
A: Data protection considerations are an important factor when drafting an employee referral policy, particularly when personal information may be shared between employees and third parties such as recruitment agencies or potential job applicants. It is important to ensure that any data sharing is carried out in accordance with applicable data protection laws, such as GDPR in the EU or CCPA in California, and should involve explicit consent from any parties involved in the process. Additionally, any data collected or shared should be limited only to information which is necessary for carrying out the job or assessing the suitability of a job applicant.

Q: What types of employees should be included in an employee referral policy?

Asked by Kevin on 2nd November 2022.
A: When drafting an employee referral policy it is important to consider which types of employees should be included in order for it to be effective. Generally speaking, all permanent or long-term contract employees should be included if possible, as these are typically the most likely candidates for referring friends or colleagues for positions within the organisation. Additionally, it may also be beneficial to include temporary or freelance staff who have direct contact with potential job applicants or have access to internal information which could help with recruitment processes.

Q: Can employees refer themselves under an employee referral programme?

Asked by Ashley on 15th October 2022.
A: Generally speaking, most organisations do not allow employees to refer themselves under an employee referral programme due to ethical considerations related to self-promotion and conflicts of interest. If this option is available then it should be clearly stated within the terms and conditions of the programme and there should also be some form of independent review process in order to assess each application fairly and objectively. Additionally, any financial rewards associated with successful referrals should only be made available after any independent review process has been completed.

Q: What kind of criteria should be used when evaluating referrals under an employee referral programme?

Asked by Michael on 28th April 2022.
A: When evaluating referrals under an employee referral programme it is important to set clear criteria which can be applied consistently across all applications received. This should include criteria related to both professional qualifications and experience for each position being referred as well as other factors such as cultural fit within the organisation or potential contributions towards team dynamics or overall organisational objectives. Additionally, any criteria used must also comply with relevant anti-discrimination legislation both nationally and internationally where applicable.

Q: How can employers ensure that their employee referral policies are fair and equitable?

Asked by Jennifer on 1st March 2022.
A: Employers must ensure that their employee referral policies are fair and equitable not only in terms of rewards but also in terms of how they are administered across all staff members regardless of their race, gender, age or other personal characteristics which could lead to discrimination against particular groups of people. Additionally, employers should consider how external factors such as economic conditions could affect their ability to offer meaningful rewards for successful referrals, particularly if these rewards are based on financial incentives rather than recognition or other non-financial rewards. Finally, employers must also take into account any applicable anti-discrimination legislation when designing and administering their policies both nationally and internationally where applicable.

Example dispute

Lawsuits Referencing Employee Referral Policy

• Plaintiff may have a valid claim if the employer violated the Fair Labor Standards Act (FLSA) or other applicable state and federal labor laws by not paying employees for the time spent recruiting referrals.
• Some states have laws which require companies to pay employees for the time spent on recruitment activities, including the time spent referring potential employees.
• If the employer did not pay the employee for the time spent on referrals, then the employee may be entitled to back wages, damages, and other relief.
• To win such a lawsuit, the plaintiff would need to prove that the employer violated the relevant laws and/or regulations, and that the employee was not compensated for the time spent on referrals.
• In some cases, the plaintiff may be able to seek punitive damages, or other forms of monetary relief, depending on the specific circumstances of the case.
• The court may also order the employer to create or revise their employee referral policy to ensure that all employees are compensated for the time spent recruiting referrals.

Templates available (free to use)

Employee Referral Policy
Employee Referral Policy California

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