Could employee referral schemes solve the labour shortage?

Recruiting has probably never been more competitive - an easy way for an employer to attain top talent is through an employee referral scheme.

Not many companies have an official employee referral scheme, which could work against them because not only is it a far cheaper way to recruit but it also reduces the risk of employing ‘unknown’ people, who you won’t really get to know for at least a month – maybe longer.

“Employee referrals are just one of our recruitment pipelines,” Georgina Gordon, LegalVision's head of people, said. “The primary incentive is to help the business be as successful as possible, as this unlocks opportunities for everyone in it.

“If referring talented people from within their networks will help accelerate that growth and progression, then people will be enthusiastic about that as an option.”

The costs of traditional recruiting

It can cost an employer up to $30,000 to recruit a new employee. This involves the job ad, interviewing, onboarding, and providing new equipment. This doesn’t include salary or the fee you will have to pay to a recruitment consultant if you use one. Furthermore, the whole process can take up to two months.

That’s approximately 60 days of a job not being filled - causing stress, anxiety and burnout amongst current staff.

The benefits of internal recommendations

An employee referral scheme sends out a message that you immediately trust your staff. You have confidence that they will recommend quality people who will add value to the business.

It also helps an employee feel more secure too.

“Since July 2022, 33% of our new hires were referrals,” Gordon said. “We usually get at least one referral a month and we genuinely believe employees refer people because they believe LegalVision is a great place to work.

“We believe that not only do employees like the idea of working with their friends, but they only recommend people they have worked with the person previously and trust in their ability to make a positive contribution to our team and our clients.”

The LegalVision employee referral scheme has a simple process. Employees are invited to refer people to active roles, or as a general expression of interest. They then contact the people team to highlight their referral, provided the candidate has applied for a job, or to facilitate an introduction.

“If the referral is successful in securing a role at LegalVision, the referee receives the following rewards upon the commencement of the referral’s employment at LegalVision,” Gordon said.

“They receive $1,000 to spend on a shared experience with the referral and at least two other LegalVision team members to help the referral make connections, have some fun and settle in.

“They also get an additional $500 to add to their external learning and development allowance and upon successful completion of the referral's six-month probationary period a further $500 to add to their existing growth allowance and a day off with full pay.”

Encourage employees to get active

Small businesses are future big businesses and a respectable way to drive success is to surround yourself with intelligent competent people with a good work ethic. Establishing or building a current employee referral scheme will create positivity within the firm and indicate that you think the business has plenty of scope for growth.

TSA Management have an effective employee referral scheme in place.

“Employees nominate someone they know that would be interested in an existing role, and our system records it as a referral,” Robert Steers, head of marketing at TSA Management, said. “Successful candidates make the referee $5,000.

“A large percentage of our staff come from referrals. We find it the most effective way because a referral means the referred person will more like be a good fit for the role and because the team will have a vested interest in their success. If we use a recruiter, it could cost a lot more than $5,000.”