Employees who refer a friend or contact to the law firm Baker & McKenzie can do rather nicely out of it if the company ends up employing that person.
“Our referral scheme gives people who recommend technical [legal] staff £5,000 and support staff, £2,000,” explains Martin Blackburn, the firm’s UK director of human resources. The scheme generates about 5 per cent of new recruits and, in spite of the sums paid, is very cost effective compared with other methods of recruitment.
Employee referral schemes are a popular way for organisations to recruit new blood. Not only are they cheap compared with traditional recruitment methods, but they have other advantages, such as an extra level of personal endorsement that traditional recruitment seldom provides.
Companies report that those who join this way are likely to be better, more loyal performers. And, unlike many who respond to an classified advertisement, referred candidates are likely to be well informed about the company.
At the top end of the market, those who introduce successful candidates can receive as much as £5,000, but sums elsewhere are not to be sniffed at. First Direct, the UK bank, pays staff who recommend friends £500 – £250 when the recruit joins and £250 if he or she is still there in six months.
“It is very successful,” says the company. Thirty-six per cent of all our new recruits come through the scheme.” Their performance is also higher “because they know people who work here, they know what it’s going to be like and they tend to make their contribution quicker”.
Leigh Lafever-Ayer, an HR manager at Enterprise Rent-A-Car, agrees: “Our employees know their jobs and what it takes. They won’t recommend people who aren’t up to it, so those they do recommend tend to stay longer.” What’s more, she explains, when new recruits join “they have an in-built mentoring system in the person who recommended them.” Enterprise, she says, pays people who recommend new employees upwards of £500.
Even recruitment agencies, which stand to lose from the application of such schemes, see the benefits for their own operations. Rob Scott, managing director of Aaron Wallis, offers candidates who refer others “day-out” incentives ranging from flights over London to bungee jumps.
“The scheme is in its early stages but represents great value for us – the incentives cost a few hundred pounds and the payback is usually 10 to 15 times that,” he says.
The practice of employee referrals appears to be more common in the US than in Europe. At Ernst & Young in the UK, 18 per cent of new employees are referrals; in the US, the figure is 50 per cent. The accountancy firm says the reason is that, like many US organisations, it relies heavily on its alumni association for recruitment. In the UK, by contrast, the first port of call is often a recruitment agency or graduate scheme.
But Angela Baron, an adviser at the Chartered Institute of Personnel and Development, raises questions about relying on referral schemes long term. “The downside can be [a lack of] diversity,” she says.
“If referral schemes are your major source of recruits, you need to remember that people tend to socialise with people like themselves. You have to recognise this – especially as more and more organisations are trying to reflect their customer base or the public.” Referral schemes are therefore best used as part of a balanced approach to recruitment, she says.
Ms Baron is also concerned about offering large cash incentives: “In an ideal world, you’d be such a good employer that your staff would recommend you anyway.”
Mr Scott urges companies to incorporate an audit trail into the referral schemes to combat fraud. In one case, a hospital in Atlanta sacked four people when it discovered that its scheme had been scammed to the tune of $35,000. Because of the need for transparency, says Mr Blackburn, human resources staff are not allowed to participate in Baker & McKenzie’s scheme.
Still, he thinks referral schemes are valuable and offer scope for innovation. “One idea I’m interested in is flexing the reward based on the part of the business that you need to recruit into. So if you’re very short on secretaries, you pay a double bonus. Doing this kind of thing also keeps the scheme at the forefront of employees’ minds.”





