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Employee Referral Bonuses

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Companies seeking talent often devise an incentive system whereby current employees are rewarded with a bonus if they refer a candidate who is ultimately hired.

A few employers award bonuses for viable referrals which don't result in a hire. However, most employers require incentive hires to remain with the firm for at least a few months before paying the bonus to the employee who referred the new hire.

Companies Offering Bonuses

According to the Society of Human Resource Management (SHRM), roughly 1 of every 2 employers offers a formal referral bonus program. Such programs account for close to 25% of all hires, on average. Many other employers have an informal referral system.

At some companies, such programs cover any job. In other cases, bonuses are restricted to positions with an insufficient supply of talent. The United States government even offers an employee referral bonus program at the discretion of individual agencies to staff hard-to-fill jobs.

Why Companies Pay Bonuses

Employers often believe that accessing the social networks of current staff can be more cost effective than other recruiting techniques including the use of executive recruitment services. Some research indicates that incentive programs yield a higher quality employee and enhance retention of staff.

Employee Bonus Amounts

Incentives vary greatly by company, with cash, gift certificates, trips and even cars being awarded. The value of incentives ranges from $250 to more than $25,000 (for executive positions) with the most common range being about $1000 - $2500 according to a survey by Worldatwork. Bonus payments were made in a lump sum about 70% of the time, on average. In other cases, a partial initial payment was made with the remainder awarded at a later date (often after one year).

If a company has an employee referral program, company policy will determine the guidelines including how to refer a prospective employee, the amount of bonuses, eligibility, and payment.

Related Articles: How to Ask for a Job Referral

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