How Employee Referral Bonus Programs Can Work For You … Or Against You

May 18 2010 in Featured, Networking/Social Networking, reCareered Blog by Phil Rosenberg

Today, most companies use employee referral bonus programs in their recruiting. It surprises most candidates that these programs can actually hurt their chances to get a company interview.

Here are some ways you can improve your odds by changing how you apply to a company using an employee referral bonus program.

Many companies offer referral bonus programs to employees for referring friends and contacts for internal positions. These programs can provide an incentive of anywhere from a few hundred to a few thousand dollars to employees referring a candidate who is hired. Most candidates think that being referred by an employee is the “golden ticket” to getting a company interview – this concept is often a mistake.

While each company is different, there are many commonalities to how companies handle resumes through employee referral programs. Employee referral bonus programs can represent an advantage to candidates, a disadvantage, or make little difference at all – depending on how you send in your resume or apply for a job.

Employee referral bonus programs have been around for a long time. However, companies expanded their use of this practice over the past ten years, responding to increasing labor and audit regulation.

Why Do Companies Use Employee Referral Programs?

  • Centralized Collection of Resumes: Nearly all employee referral bonus programs require that the employee send the referred resume into HR. This allows HR to collect the nearly 50% of the resumes a company receives through their own employees’ personal networks.
  • EEOC and FAR: In order to comply with stronger EEOC regulations (plus Federal Acquisition Regulations), companies had to build procedures to show that they give all applicants an equal chance at employment, including those that apply through their personal contacts. Employee referral bonus programs incent employees to forward resumes that come into their inboxes. These regs also apply to government and subcontractors and vendors to contractors.
  • Auditors: Public and regulated companies saw strengthened audit rules about the same time as EEOC regulations were strengthened by The Patriot Act. Auditors typically recommend that companies use employee referral bonus programs as part of their EEOC compliance, as procedures to equally consider all resumes submitted – including the average 50% of all resumes submitted directly to individual employees through personal networks.
  • Reduce recruiter fees: Paying an employee bonus is less expensive than recruiter fees

Not all companies have implemented employee referral bonus programs, but companies many have increased the use of these procedures. Here’s how to tell if a company is likely to have a referral program, so you can better plan your approach.

How Can I Tell If A Company Uses Employee Referral Bonus Programs?

  • Public or Private: Most publicly traded companies use employee referral bonus programs
  • Auduted: Most companies who have a bank loan are required to be audited – auditors require compliance with EEOC laws
  • Regulated: Most companies in regulated industries use employee referral bonus programs
  • Government work: Companies that bid on or are current government contractors at the federal, state, local plus defense must comply with these regulations or risk loosing huge amounts of business. So do the subcontractors and vendors to these companies.
  • Company website: Many company websites list full employee benefit programs, and may include employee referral bonus programs
  • Ask a contact at that company: Since employees have a monitary advantage (some might say a “bribe”) to submit resumes to HR, it’s in your contact’s self interest to encourage you to submit your resume to directly them individually.

Employee referral programs can either work for you, or against you – depending on how you approach your job search. Employee referral programs typically change how a candidate can successfully gain the hiring manager’s attention. Using the same old methods will usually land you on the express train to HR.

How Do Employee Referral Bonus Programs Work Against You?

  1. Remove networking advantages: Employee referral bonus programs remove advantages of the way that most of us were taught to network into a company, because their intent is to funnel resumes into a centralized database – the same Applicant Tracking System that your resume would go if you applied online. Remember, these programs are set up to show equal treatment of candidates.
  2. Discourage passing resumes to hiring managers: Most companies track bonus eligibility by requiring employees to submit resumes directly to HR – not to the hiring manager. Remember, the program’s purpose is to centralize resumes in an HR Applicant Tracking System … it’s designed to remove the advantage of passing your resume to a friend.
  3. Some organizations have penalties against breaking the rules: Employee referral bonus programs are designed to build a pipeline of resumes into HR, not to hiring managers. Heavily regulated companies and those who have had past EEOC/DOL issues are concerned about employee adherence to these procedures – breaking the rules could trigger increased government audits and big fines. Many companies who are at greater risk of audits or fines respond by putting penalties in place for employees and managers who circumvent the system. Do you really think an employee will risk their job by breaking the rules to help you? Do you really think that a hiring manager will risk their job or budget to circumvent the system?
  4. Unfocused Networking less effective: It’s seldom effective to get your resume to just any employee of a company that offers employee referral bonuses, given the high likelihood that it will be sent to HR.
  5. Interviews dependent on keyword search: Since your networked resume is evaluated in the same way as the hundreds (or thousands) of other resumes from job board & company website, it’s pre-screened by searching for keywords. Remember, these policies are designed to remove the advantage of “going around” HR.

While employee referral bonus programs create a number of unfavorable situations for the candidate, they also create some advantages. What are some methods with greater odds of gaining hiring manager attention? Here are a 6 ideas:

How Can You Make Employee Referral Programs Work For You?

  1. Fewer networked resumes make it to the hiring manager: Bad news – it’s tougher. Good news – it’s tougher. This additional filtering makes it even more valuable to get your resume to the hiring manager, since more resumes are filtered by HR. If you can get your resume directly to the hiring manager, it carries even more impact and increases your odds of an interview even more.
  2. Highly focused networking can be effective: Today, it’s not enough just to get your resume to an employee but to improve your odds you need to get it to the right employee – the hiring manager. The two best ways to accomplish this is to get a conversation with the hiring manager, or encourage an extremely close friend or relative to break company rules and send directly to the hiring manager.
  3. Know when to send and when to hold off: Sending your resume to the first person you talk to is a directly invitation to HR – not where you want to be (unless you want an HR job). Instead of asking where to send your resume, ask who is responsible for a specific department or function and call them. It will likely take many attempts to reach this person and they may not be the hiring manager – it’s not the easy path. However, the easy path is so much less effective, that it make the extra effort to identify and call the hiring manager first very worthwhile. Most candidates will agree that if they have the chance to talk to the hiring manager, they can get an interview – because the odds go way up.
  4. Ignore paths to HR: Job search can seem like a maze and HR can be a dead end. When trying to get through a maze, you you stop and give up at dead ends -Or do you try a differnt path? Many companies direct their employees to direct all potential candidates to HR – a path that is not in your best interest, because it takes away your advantage and lowers your odds. Don’t be scared that a company will “get mad at you” for ignoring a direction to HR, but find a different path to the hiring manager.
  5. Change your goal: When reaching out to network contacts, many job seekers state ineffective goals. Your goal should be to have a conversation, not send a resume. If your goal is to find the contact to send your resume, you may be told to send it directly to your contact and they’ll forward (to HR, so they qualify for the bonus). Alternatively, you may get a name and email, with encouragement to mention the contact’s name in your email – It’s a good bet that this person is in HR, and mentioning your contact’s name qualifies them for a bonus. The odds are much better to get hiring manager contact information if your goal is a conversation to share industry info – and much worse if your stated goal is inquire about jobs.
  6. Your network is even more valuable with employee referral programs: If you leverage your network well, your contacts are even more valuable to you for companies with employee referral programs. Leverage your network for information, not directly for jobs, and you’ll have a greater chance of getting hiring manager contact info, or at least getting closer to the hiring manager (it’s often a multi-step process in larger organizations).

While employee referral programs are in place at most large, mid-sized and heavily regulated employers today, even many smaller companies use these programs. These policies change the game of how to be successful in networking into a company. The old rules don’t apply … instead, the old rules simply fast-track you to an HR database. However, by changing strategy of how you approach a company, these policies can be a big advantage for the smart candidate.

How will you change your approach to companies you’ve targeted, to increase your chances of landing an interview?

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Author: Phil Rosenberg

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