Hiring costs are biting into companies’ coffers as the pandemic continues. Yet, a recent study notes that companies who implemented a referral program are patting themselves on their backs for the costs saved.
According to new data from Clutch, more than half of companies with an employee referral program (55%) say it reduced hiring costs. On average, it costs USD 4,129 to hire a new employee, according to data from the Society for Human Resources Management. Employee referral programs can decrease that cost.
While cost savings is important during the COVID-19 pandemic where companies are not hiring, it will be vital when business reopen and see themselves working with smaller budgets.
Anna Papalia, the chief executive officer of ShiftProfile, an interviewing consultancy, says that for one consulting contract, she was responsible for recruiting and hiring USD 7.2 million in yearly salary.
"We relied heavily on a generous employee referral program and leveraging our internal networks," Papalia says. "I believe one of the best and most reliable talent pipelines is a referral program."
Papalia states that an employee referral program for the project saved her company upwards of USD 1 million.
The Clutch survey noted that 46% of companies spend 1 month or less on their hiring process.
But in key industries on the COVID-19 pandemic front lines, like e-commerce and healthcare companies, they face greater challenges when finding suitable candidates for roles requiring specialized skills.
Here, referral programs can help. Ollie Smith, CEO of Card Accounts, a payment data merchant service provider, says he hires referred candidates twice as fast.
It takes 4-5 weeks for Smith to vet and hire an employee, but Smith can skip certain stages and hire referred candidates in as little as 2 weeks.
Nearly half of companies with referral programs (49%) say that referred employees stay at the company longer.
Part of the reason is that the recent hires are motivated to better integrate into a company's culture because they already know someone at the workplace. It means they can bond faster with co-workers and drive better collaboration.
"It's likely that an employee who is referred already has a close connection with the person who referred them," said Joey Price, CEO of Jumpstart HR, an outsourcing consultancy for small businesses and startups. "Working with people you like is important because you're more open to positive and constructive feedback, attempts at team building, and buying into corporate vision."
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