We Analyzed Employee Referral Programs From 200+ Companies. Here's What We Found.

At Drafted, we get to talk to companies about their employee referral programs every day, and our focus is to help them unlock the power of their company network. 

It’s conventional wisdom that employee referrals are like gold when you’re mining talent. To manage a successful referral program, there are many tactical pieces involved. We often get asked questions about employee referral programs and we've noticed a lot of recruiting team have the same challenges.

Companies often ask our team things like:

• Do we even need a referral bonus? Shouldn’t employees just refer their friends because they like it here?
• Should we do something crazy like offer a trip to Hawaii?
• How much do we need to budget for referral bonuses?
• Does a $20,000 referral bonus really outperform a $2,000 referral bonus?
• Should we buy better ATS software to help with our referral program?
• How do we keep referrals top-of-mind, without getting only top-of-mind candidates?
  

To help answer some of these questions, we surveyed and compiled data from over 200 companies in 2020. I’ll give you some of the insights here, and we’re making our full report available to download for free.

We analyzed over 200 employee referral programs in 2020. Here’s what we found.

Insight #1: Your Applicant Tracking System is not going to make or break your employee referral program

To understand this, we looked at the % of hires through referrals across small, midsize, and large organizations. For example, if you hire 10 people in a year and 3 of them come through referrals, your referral hire percentage is 30%

We found that the median across all sizes, regardless of ATS, was in the same ballpark - 25% to 30%. 

Insight #2: There is an emerging trend of Non-cash referral rewards

1 out of 10 companies reported having some kind of non-cash reward as part of their referral program.

Examples of rewards included charity donations, paid trips, and even company stock options. To see more kinds of rewards you can check out our full list in the report.

Insight #3: More companies are experimenting with external referral rewards

We found that 25% of organizations are either experimenting with or offering an external referral reward. Typically, external referral rewards were lower than normal employee referral rewards.

The difference in rewards was typically driven either because of a lower conversion to hire rate, or for simplicity of managing the payouts and tax implications in various geographies.

Insight #4: Employee referral programs produce fairly consistent results regardless of size

We found that the median percentage of hires through referrals was 27% and best in class was 44%. You can use these as benchmarks to measure how your referral program is performing.

You can find more insights and get the full report here.