Cut Your Cost per Hire With a Referral Program

September 8, 2022

8 min read

Did you know that referral programs can help reduce recruitment costs? A recent study found they can save businesses up to $5,000 per hire. That’s a lot of money! If you’re looking to cut costs on recruiting, it’s time to start adopting a referral program. This article shows the benefits of referral programs and ways to get started today.

Two main types of referral programs

There are two types of referral programs: internal and external ones. In the first case, the company’s employees recommend potential candidates to the HR department. Everyone can suggest a candidate, even organizations such as recruitment agencies when we talk about the external program. In both instances, people can refer to not just active job seekers, but also passive candidates. According to a study by LinkedIn, around 79% of working professionals are similar to this and ready to consider new career opportunities.

We, at StaffingPartner, advise you to start with an external program to attract top talent from outside your company, and we will explain why.

How do both referral programs work?

Internal referral programs incentivize employees to refer someone they know for a job. The incentive can be anything from a monetary reward to free day-offs. The referral can be a friend, a family member, or even someone they met at a party. The employee who recommended them gets the reward if the referral is hired.

External referral programs, on the other hand, incentivize everyone to refer candidates, including freelance recruiters and staffing agencies. The incentive is usually monetary. Vacancies with information about ideal candidates are published on the company’s website, where anyone can find them. These publications often attract recruiters. If they are interested, talent specialists clarify the vacancy’s specifics and choose from their vast pool of candidates, who best meet the company’s requirements.

Advantages of external referral programs

External referral programs have several advantages over internal ones and other recruiting methods.

Chance to reach a large pool of potential candidates

By publishing vacancy information and reward conditions on the company’s website, you give recruiters and specialists from staffing agencies an opportunity to find out about your company and open positions. They can search their databases to find the best candidates and refer them to you. You can also take the initiative and contact us to find out if we can recommend anyone on the terms of your referral program. This increases the chances of finding the ideal candidate for the job.

“When a client comes to us cooperating on standard terms, we not only select a candidate from the available pool, but initiate a search, so that we don’t miss the perfect match. We agree on deadlines and give a guarantee. If our candidate does not pass the trial period, we will search for a replacement free of charge. The situation is completely different when StaffingPartner cooperates with companies under the referral program,” said Julia Kalinovska, the COO of StaffingPartner. “In both cases, our recruiters are interested in presenting the most suitable candidate, but in the case of an external referral program, there are no obligations or guarantees from our side.”

So, drop us a message if you don’t want to wait until you get lucky with highly qualified candidates. We will present them to you in the shortest terms (just 3 business days) and with a guarantee. 


You need to spend some resources on rewards for those making referrals to people you might hire. Interviewing and onboarding each candidate also costs time and money. But, on average, referral hires cost 20-50% less than hires made through other methods. 

Qualified candidates

When recruiters find an open vacancy on your external referral program page, they can ask for more information to present the candidates they consider the best fit. The vacancy can also be noticed by a specialist in your field who knows someone perfect for the job but is not interested in it themselves.

In theory, employees also can request more detail, but they may not understand what to ask. This way, external referral hires are often better qualified than internal ones.

“In my experience, employees often recommend specialists, whose professional qualities they cannot assess,” said Julia. “For example, relatives or friends they did not personally work with. This especially applies to technical vacancies. The employee will refer to irrelevant specialists if they do not understand the tech stack.”

Faster hiring process

External referral programs are less time-consuming for HR departments. Companies don’t have to spend time searching for referrals or conducting interviews. All of that is done by the recruiters and other participants in the referral program. The time from receiving a resume to making an offer can be reduced by 50%.

“From my point of view, an external referral program is beneficial for both companies and talent specialists,” said Julia. “A company saves time and money on recruiting, and a recruiter can quickly fill a vacancy and get a reward if they have the right specialist in their pool.” StaffingPartner has nearly 230 000 candidates in the database, so let us know if you have open vacancies.   

An essential drawback of all types of referral programs

You should be aware that a referral program is an additional method. Referral programs wouldn’t be effective as companies’ only recruiting method. They must be part of a comprehensive recruiting strategy that includes other ways, such as job boards, cooperation with agencies, and social media. 

Despite this potential drawback, referral programs are still one of the most effective ways to decrease recruiting expenses. So if you’re looking to cut costs per hire, consider implementing a referral program at your company. And we are going to tell you how.

How to get started with a referral program

Maybe, you already have the program, but it doesn’t work as effectively as you want. Or perhaps you don’t have one and are thinking about implementing one. Either way, there are a few things you need to keep in mind to make sure your referral program is successful.

Creating an external referral strategy

1. Set strategic goals.

Your referral strategy should align with your business goals and general recruiting strategy. For example, if you want to increase the number of sales, think about what kind of employees you need to achieve this goal and what skills they should have.

2. Develop an employee referral program policy.

Having all the rules written down in one place is essential, so there are no misunderstandings. The policy should include the following:

  • Who can participate in the referral program?
  • What is the referral bonus?
  • When does the referral bonus get paid out?
  • Are there any restrictions on who can be referred?
  • How long do referrals have to stay with the company to receive the referral bonus?
  • Who is responsible for tracking referrals?
  • How are disputes resolved?

3. Invest in your brand as an employer.

46% of job seekers consider corporate culture before agreeing to work. Therefore, it is essential to invest not only in team building, corporate parties, and collective trips but also in demonstrating the company’s life from the inside on social networks and the website. Track, what reviews about you, as an employer, are available online. Be sure to give feedback and explain problematic points from your perspective.

4. Make sharing CVs the simplest thing.

Ensure your referral system has a web page or a specific section on the careers page of your website that is easy to find and use. The process of sharing CVs should not take more than a few clicks. Autoresponders can also come in handy. They will notify the person who submitted the referral that their application has been received and is being processed.

5. Establish rewards and bonuses

For external referral programs, use monetary rewards. It can be equivalent to a future employee’s first salary. But in this case, serious talent specialists will only be interested in filling middle and senior-level positions. It is better to use an internal program to search for juniors. The most popular employee bonuses will include additional vacation days or gift certificates.

6. Track, measure, and improve.

You must be constantly tracking the number of referrals, new hires, and quality of referral hires. Based on this data, you can assess the effectiveness of your referral program and make changes if necessary.

The bottom line

The referral program is a great way to reduce recruiting expenses. But it only works as an additional recruiting method. You can’t rely solely on referrals. So, implement a referral program to minimize the cost-per-hire on some vacancies and contact us to fill other positions!

Read also: How to Speed Up the Hiring Process and Reduce Costs, and Talent Sourcer vs. Recruiter: What’s the Difference?

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