Employee Referral

What employee referral is

Employee referral (التوظيف بترشيح الموظفين) is a recruitment method in which an organisation’s employees put forward people they know as candidates for its vacancies, within an announced employee referral program that has rules, and not as an occasional recommendation made in passing.

The people who make the nomination are the organisation’s own staff, and the candidates they nominate come from among their acquaintances. The vacancies are the organisation’s open roles. What turns these nominations into employee referral in the sense meant here is the program around them: the organisation has announced it, and it runs on stated rules. A colleague who mentions a friend’s name once, with no announced program and no rules behind the mention, has made a casual recommendation, which is a different thing from employee referral.

Why organisations use employee referral

Employee referral is used for three reasons:

• Greater speed. The referred candidate arrives with prior context about the role and about the organisation.
• A different structure of cost per hire. A referral bonus takes the place of spending on advertising channels, so the shape of the cost changes, and so does who inside the organisation carries it.
• Reach to people who are not looking. Someone who does not browse job advertisements may still listen to a former colleague.

Speed comes from what the candidate knows on arrival. A person referred by an employee has already heard about the role and about the organisation from someone who works there. That person comes to the recruitment process with a context in place, instead of learning everything about the role and the organisation from the start.

The change in cost per hire lies in how the spending is made up. Where vacancies are filled through advertising channels, the money goes to those channels. Where a vacancy is filled through employee referral, a referral bonus paid to the employee who made the nomination takes the place of that spending. The change is in the form the cost takes, from payments to channels to a payment to an employee, and with that change the part of the organisation that carries the cost can change as well.

Reach depends on who sees the vacancy. A job advertisement is seen by the people who browse job advertisements. A person who does not browse them may not see the advertisement, but may still listen when a former colleague brings a vacancy to their attention. Employee referral reaches that person through the colleague rather than through the advertisement.

The risk that comes with employee referral

A referral can reproduce the same profile again and again, because the people an employee knows can resemble that employee in specialism, in career path and in place. Each nomination draws on the circle of the person who makes it, and a circle of acquaintances can share the background of the person at its centre.

When an employee referral program accounts for a large share of hires, the variety among the organisation’s candidates narrows gradually, and no one has made a conscious decision to narrow it. The narrowing comes from the accumulation of referrals and not from a policy anyone adopted.

A more serious risk is that employee referral turns into nepotism (المحاباة). That happens when the referred candidate skips evaluation steps that other candidates go through. The candidate who came through a colleague then reaches the hiring decision by a shorter route than the candidate who came through any other source.

The line between employee referral and nepotism is procedural. A referral opens the door, and it changes nothing that comes after. Where the referral brings the candidate to the process and the process then runs for that candidate exactly as it runs for everyone else, the organisation has a referral. Where the referral also removes steps from the process, the organisation has nepotism.

What makes an employee referral program sound

An employee referral program is sound when it has the following four elements:

• One evaluation track for everyone. A referral is a source of candidates, not an exemption from the structured interview.
• Written bonus rules. They state when the bonus is due, on what conditions, and how a referral is handled when more than one employee refers the same person.
• Exclusion of decision makers. An employee who takes part in a hiring decision is not entitled to a referral bonus for that hire, which prevents a conflict of interest at its source.
• Disclosure of family ties. Where the referring employee is related to the candidate, the relationship is disclosed, so that the decision is taken with knowledge of it.

The single evaluation track is the procedural line described above, set down as a rule of the program. A referred candidate enters the same assessment as every other candidate, including the structured interview, and the referral affects only where the candidate came from.

Written bonus rules set out three things: the point at which the bonus becomes due, the conditions attached to it, and the position of the referral when two or more employees have referred the same person. Each of the three is answered in writing.

Excluding decision makers removes the conflict before it can arise. An employee who helps decide whether a candidate is hired would otherwise stand to gain a bonus from the outcome of that decision. Under the rule, the employee who takes part in the decision has no referral bonus to gain from it.

Disclosure of a family tie serves the hiring decision: the people taking that decision know of the relationship when they take it.

A limit on the employee referral bonus

One way an organisation can control an employee referral program is to tie the referral bonus to the new hire staying for a specified period. The condition is aimed at hasty referral: an employee who knows that the bonus depends on the hire staying has a reason to weigh a nomination before making it.

The effect of that condition is limited. The referring employee does not control what the new hire experiences after joining the organisation, and the new hire’s stay is an outcome of that experience. Making the referrer answer for the stay holds the referrer responsible for something the referrer has no power over.

This is an explanation of the concept, not legal advice.