The Importance of Employee Referrals for Staffing Agencies, and How to Get Them Right

women, cell phones

As the cliché goes, good people know good people. 

For staffing agenciesthe adage is used to promote employee referrals, the hiring strategy “in which employers encourage current employees to refer qualified candidates for jobs in their organizations.” 

Personally, I have misgivings about the reliability of this strategy – I’m friends with lots of people I’d never want to work with nor risk my professional reputation to endorse (No offense, guysWe’re still on for happy hour, right? Right? Guys?) – but when it comes to staffing, the data bears it out: According to the Society for Human Resource Management (SHRM), “employee-referred new hires tend to be better performers than nonemployee-referred new hires and to stay with their organizations longer. And on top of that, referrals help staffing agencies deliver quality talent to your customers at a lower cost. 


Benefits of Employee Referrals as a Source of Candidates 

There are a number of benefits that come from adopting an employee referral staffing strategy. In fact, according to Staffing Industry Analysts (SIA), referrals are so effective that the majority of staffing agencies would prefer to source their hires from referrals as frequently as possible. 

Among the most visible benefits of employee referrals for staffing agencies: 

  • According to CareerBuilder, “82 percent of employers rated employee referrals above all other sources for generating the best return on investment,” and “88 percent of employers rated employee referrals above all other sources for generated quality of new hires.” 
  • Employee referral programs are also more cost-effective than other recruiting strategies because they rely mostly on word-of-mouth marketing, as opposed to more expensive sourcing methods. And with the associated decrease in time to hire, you spend less money on talent acquisition. 
  • Employee referral programs generally cut down on recruitment time and time to hire, because they essentially outsource the task of sourcing and pre-screening applicants to your current employeesYou can get potential candidate information quickly, and referred candidates are usually already familiar with the company and onboarding process. According to Jobvite, employee referrals can reduce hire times by 40 percent. 


  • Employee referral programs help your agency’s brand because your existing employees are effectively telling their connections, “This is a great place to work.” 
  • And because referred employees are often match with company culture, they are more likely to work at a business longer, helping to reduce turnover rates. About 47 percent of referred employees remain with their company for more than three years, compared to only about 14 percent of employees hired from a job board application.

How to Build a Staffing Agency Employee Referral Program

If you want to get your employee-referral program right, you’ll need to consider following: 

Offer Incentives for Quality Referrals 

Presuming a referred candidate is hired, it helps to give the referrer something for their suggestion. According to referral network Draftedcompanies that offer referral rewards source an average of 29% of their hires from referrals, compared to 21% of hires for companies that offer no incentive. Cash is always welcome, but gift cards or gift certificates for “experiential rewards” – restaurants, movie tickets, etc. – can also be a powerful incentive. 

(Aside: It’s important to ensure you’re only being referred quality candidates. According to the Harvard Business Review: 

“…recent research finds that employee referrals are significantly better when the referrer and candidate know each other well, compared to when they have a weaker connection. In fact, when the two know each other only through social media, the hiring outcome is not any better than that of candidates with no referral at all. 

With this in mind, staffing agencies should ask referrers if they’ve worked with the candidate in the past, and how long they’ve known each other.) 


Make Referrals Easy for Your Current Employees  

Reach out to your current employees to let them know you’re looking for referrals, and – if applicable – if you’re looking for a specific skillset or specific job experience. Then, make sure they have an easy way to contact you or introduce you to their referred candidates: ask them to include a link to a LinkedIn profile or attach a resume. Or even better, use an online employee referral tool. 

Keep Referrers Apprised of Where Their Referrals Stand 

According to CareerBuilder, 49 percent of employees said their company doesn’t keep them informed on the progress of a referred candidate. Not cool. When this happens, the accompanying frustration makes them less likely to refer another friend. Beyond that, it could hurt their relationship with that friend, and that’s really not cool. 

Set Goals for Employee Referrals, and Measure Their Success 

As the saying goes, “What gets measured, gets improved.” Identify specific, measurable goals for your employee referral program, and select a timeframe within which you need to achieve these goals. Something like, “get 20% more qualified candidates,” or “reduce time to hire by 15 days.” Then, check to make sure you’re hitting those goals. If you’re not, make adjustments until you’re firing on all cylinders. 

Turn Your Employees into Recruiters 

By instituting an employee referral program for your staffing agency, you can save time, save money, elevate your agency’s brand, and improve the quality of your hires. And by using the above guide, you know exactly how to get one started. 

Struggling to find quality hires? Learn how programmatic recruitment advertising can help you find the best talent on the Crelate blog! 

Filed under: Business Development, Recruiting Tips, Staffing Agency Management