Agencies, as the talent crisis continues, are actively promoting and reinventing in-house employee referral programs (ERP's) to get the right candidates.
These are an incentive where an employee gets a bonus if someone they recommend for a role is appointed and they get through a probation period.
Traditionally, the reward has been in the $1,000-$3,000 range but lately, with high demand for experienced staff, that has lifted to as much as $10,000 for getting a successful candidate.
While such programs have been in place for a long time, companies are reinventing the traditional recruitment method with a more creative outlook, including raising the bonuses and fast-tracking the payments.
Jade Lee, workplace culture and engagement expert, told AdNews: “The promotion of in-house programs are cyclical because they are more in demand in tight labour markets and often go a bit dormant in the slower times.
“Employee referral programs are great for improving company culture, rewarding your employees and they attract a higher calibre of candidates because employees are unlikely to recommend someone that they are not confident will fit into the workplace.
“Every company should have one, as every workplace needs diversity, and recruiting from the same pool will undermine that.”
Melanie Gillam, principal consultant, NewyTechPeople & RemoteTechPeople, told AdNews: “Referral bonuses aren’t a new concept but executing them successfully is challenging.
“Employees are attracted by the concept of a bonus but can easily be disengaged by the referral criteria or the time it takes for bonuses to be paid (especially if this is dependent on the referred employee passing their 6-month probation).
“Many companies have revised conditions to make their programs more attractive during the perceived ‘talent crisis’, this can quickly overburden internal talent acquisition teams.
“This is where recruitment consultancies can really add value; supporting internal teams so they can focus on broadening their talent attraction and retention strategies.”
Most agencies have been reinventing what a referral program looks like.
Pauly Grant, Publicis Groupe ANZ, chief talent officer, told AdNews: “Publicis Groupe ANZ has an active referral scheme, we offer $1k to referrers for entry level roles successfully appointed.
“A year ago, in response to talent shortages we increased our payment from $3k, to a competitive $4k reward for referrers of all other roles.
“The referrer receives 50% of the fee on the candidate’s start date, and the remaining amount if/when the employee has successfully completed their probationary period with the company.
“Publicis Groupe’s referral scheme has been working successfully - 28% of our placements have come through via referrals this year, up from an estimated 27% in 2021.
“Publicis Groupe’s referral program not only provides us with more immediate access to talent – we find that because of their knowledge of the business, employees tend to refer those who are often very well-suited to the role they are referred for.
“Further to that, the referral scheme can help to unearth talent we might never have known or been aware of, and even outstanding candidates who were not necessarily actively seeking a job.
“All of our agencies take part in this program, which helps bring in new diverse talent to many of our agencies. The program allows us to generously reward our employees for every referral, contributing to the sense of connectedness we take pride in here at Publicis.”
Laura Aldington, CEO Host/Havas – on behalf of Havas Village told AdNews: “It’s no secret that we’re all in a hot talent market, we use several channels to recruit and we also have a generous staff referral program in place, offering $4,000 to anyone who successfully places a candidate within the Village.
"There is no doubt our existing team are some of our best advocates, and are well versed in our culture, our benefits, and the roles and agencies we’re recruiting for… we respect they have busy day jobs and any spare time they have is valuable - if they are going to invest that into helping us grow and secure excellent talent, they deserve to be remunerated for that effort."
James Richardson, co-founder of Optimising, an independent SEO agency, told AdNews he's had an in-house employee referral program for several years.
“It has actually been really successful, and so important in times like today where demand for talent outstrips supply," he says.
“For example, recently we made a hire through a recruiter, and that hire was able to refer us to two other people in their extended network, saving us money in hiring talent.”
John Vlasakakis, co-founder of Next&Co, an independent marketing agency: “We offer $5,000 to any person who refers a successful candidate.
“Our highest retention of staff has been via these referred people and they are bloody good at what they do!”
Independent digital marketing agency, The Wired Agency, launched a reimagined referral program called Recruit Your Mates, where $10,000 per role is paid for successful placements.
The person who recommends a successful candidate will get paid 50% upfront, then another $5,000 once that candidate successfully finishes a trial period anywhere between three and six months.
With six roles currently open the agency is prepared to pay $60,000, and unlike traditional ERP’s there are no limitations to existing staff referrals. Anyone externally can also put forward candidates and be rewarded.
Angela Hampton, Wired Agency founder and managing director: “We’ve turned down more than a million dollars worth of new business this year alone as we’ve struggled to find good talent.”
Michelle Hampton, Wired Agency managing partner, told AdNews: “We felt that conventional recruitment tactics weren't working anymore and we needed to accelerate things.
“We've always had an internal referral incentive program, and when looking at our recruitment tactics, we noticed they were quite siloed.
“So Recruit Your Mates stemmed from that insight, we thought why don't we expand our internal incentive program to literally everyone and remove all those barriers.
“There's no great calculation or strategy behind why we went with the $10,000 reward, other than using recruitment fees as a bit of a guide.
“When hiring a recruiter, we can pay up to 15% of someone's annual salary for that placement, so we knew we could afford offering a bigger incentive, because it would cost us that much to hire a recruiter to find someone.
“A flat rate of $10,000 made more sense than offering a percentage, because people can be quite private about their salaries, and we obviously didn't want to advertise that too much.
“It's been incredibly successful so far - much more successful than putting an ad on LinkedIn.
“I think the major reason why this is working is because there are no barriers to the incentive - participants don't have to belong to a certain organisation to be eligible to get the bonus.
“Interestingly, we've had quite a few industry people and fellow agency owners reach out personally to commend us on the idea.
“I will say, personally, I haven't seen anything like it - but I think given the fact that so many agencies are struggling with recruitment right now, I have no problem if people want to use our idea, because it's definitely working.
“We're obviously in a creative industry, I recommend to agencies who are facing business challenges they should draw upon their creative experience to come up with solutions - that's literally what we did.
“During times like this, coming up with creative ideas is probably the best option when conventional methods aren't working anymore.”
While the costs of paying in-house referral bonuses can be less than recruitment fees or job advertising costs, do the professionals deliver better results?
The non-monetary cost of a bad hire far outweighs the monetary with case studies showing that high turnovers have a negative impact on overall team performance, morale, work timelines and brand reputation.
Lee Shorter, practice manager at recruitment agency Aquent Australia: “What has surprised me is how many clients have gone with candidates of ours versus referred candidates despite it meaning having to pay a recruitment fee.
“It's a sign that companies are willing to pay for the best talent regardless of the financial implications.
“I have heard of large referral fees being offered (usually by recruiters which would come out of their placement fee) but then going missing when it comes to actually paying them out.
“They're desperate for talent to get roles filled but when reality hits and they have to pay a fee to the referrer it doesn't seem like a good idea.
“I have also heard of large referral fees being offered but split into an upfront payment and then payment if/when the referred candidate passes their probationary period. This is to counteract the fact candidates are accepting roles but then continuing to get approached about other positions straight after joining.
“Quite often they can have their head turned by more money, particularly if the onboarding is poor or the job/business isn't as it seemed during the interview process.
“While referral fees are an incentive, the main source of candidate generation for Aquent has always been referrals. You would only refer a friend or colleague to a business or recruiter if you'd had a good experience with them, so no matter how much you're willing to pay it will ultimately still come down to reputation.”
Simon Hadfield, managing partner at recruitment agency DMCG Global: “Referral programs work at various levels but I think it's probably best used for a more junior to midweight level.
“Not saying it can't work for senior talent - but when you get to more senior talent, there's more of a process and thought required with more critical roles, that's often when external recruitment can probably offer a greater variety of local and international talent.”
“I think external recruiters play a really, really critical role, but we know that agencies don't want to spend money externally, and often will only do it when it's absolutely critical and necessary.
“I do my very best to offer a really good service to provide good people and a good offering. But I understand when agencies don't want to use us, because I've been there.
“I've been at the agency, and we worked out one year that we were haemorrhaging a lot of money through recruitment. So we tried to tighten our belts, and we were one of the first agencies, I believe, at BWM to bring in-house recruitment about 15 years ago.”
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