Definition
An employee referral program means hiring candidates recommended by current employees. Many organizations pay a bonus when the referred person is hired and stays for a set time. It is often a fast source, because the employee knows both the job and the person.
Useful formula
Share of hires from referrals = hires from referrals / total hires × 100.
Illustrative example: 5 of 20 hires come from referrals, or 25%. If the bonus is $1,000, it belongs in the cost per hire for that source.
The risk to watch
Employees often refer people who resemble them. A referral-heavy pipeline can narrow the diversity of applicants. Assess referred candidates with the same criteria and scorecard as everyone else, and answer them too: a silent rejection hurts both the candidate and the employee who referred them. Also tell the referring employee where things stand, without sharing the candidate's private details: it keeps them willing to refer again.