Referrals are one of the most important factors for your talent pipeline. Technology has increased the speed with which roles can be filled, creating massive opportunity. However, one major gap that many solutions have is the lack of ability to incorporate existing talent referral programs or the support to build one from scratch. Building a strong referral program can be time-consuming and it’s a lot to manage. At Aliro, one of our focuses is helping companies build strong referral ecosystems from within and adding an even greater opportunity by allowing for external referrals. Our external referrals create a stronger pool of talent because we can curate a list from alumni that have retired or moved on from the company, latent ATS data from previous applicants, and specific talent communities like the military or veterans. These are the best practices for creating a strong program which we’ve gathered from years of building them for our clients.

The Truth About Referral Programs

Referrals remain one of the steadfast paths to quality candidates. They also reduce your overall time-to-hire, therefore reducing cost. A good referral program can be like the golden goose for your recruiting efforts. Let’s look at the facts:

Most importantly, referral programs can tap into the 73% of job seekers who are only passively seeking new opportunities.

Referral Programs Find Missed Talent

There are several reasons why more people are passive versus active jobseekers. The security of having a job makes it difficult for loyal and talented employees to seek something better. Many people would avoid the stress of looking for a new job, even if they were not satisfied with their current one. On the other hand, those perfect candidates might not know that a company with the perfect role for them exists. Getting a role in front of those excellent matches costs many employers a lot of trial and error along with time and money.

A strong referral program helps you tap into the networks of other talented individuals who know what those passive job seekers are looking for. We decided to take this idea and supercharge it for our clients. Aliro’s platform has the option to build in referral bonus incentives for employees which encourages them to submit strong candidate referrals.  Customizable incentives can be created to attract external referrals overall or target a military audience. You get access to a large network of passive job seekers and the people that know what they are looking for without having to pay for advertising or spend time searching and outreaching. The great candidates come to you. Our match system pulls in employee referrals, external referrals, direct applicants, and profiles already in your ATS, so no quality candidates fall through the cracks.

Referrals Save Money

Referrals bring the best talent directly to you. This decreases the time spent on hiring and the cost of advertising. Referrals stay longer, reducing turnover and saving future recruiting costs. One study showed that referrals staying longer leads to a 41% reduction in costs associated with re-filling the position. The average overall cost of hiring a new employee is between $3,000 and $5,000. Strong referral programs can reduce or eliminate costs for things like advertising on job boards and recruiter fees. On top of that, daily opportunity costs—calculated by dividing your total revenue by the number of employees and the 260 working days in the year—can give you precisely how much opportunity not filling that role is costing your business. Let’s say your standard time-to-hire is 3 months, revenue this year is 1 million, and you have 60 employees. Every day that your role is open, it is costing $64 in opportunity cost.

A strong referral program could save you as much as $3,000 or more in opportunity cost per role. Add on the savings in standard recruiting expenses, and a strong referral pipeline could drastically change your cost of hiring. We have seen that increasing the number of referral hires you have per year to just 30 people can dramatically reduce your overall recruiting costs.

What Makes A Strong Referral Program?

A strong referral program starts and ends with goals. Outline KPIs for introducing a referral program and utilize a system that can help you track those goals. Consider these points when aligning on your goals:

  • Your goals need to be measurable, so focus on items like time-to-hire or the amount of engagement for the referral program.
  • Make sure you can easily track those goals over time. Employee engagement can be hard to quantify if you are not specific, so use metrics like email open rates, social post shares, and total referrals if this is one of your goals.
  • Aliro’s platform can help you track and reduce time-to-hire, track and manage referral program engagement, and uncover the latent talent with your ATS to track and reduce rework for recruitment teams. Want a demo to see how? Schedule one today.

Once you have your goals set, design your program to be simple and easy to use for your employees. The easier it is to participate in, the more engagement you will have. A mobile enabled platform, like Aliro’s app, can help increase engagement too, as most referral conversations happen outside of work and away from computers.

Even though your employees will think it’s simple to participate in, a strong referral program has a lot of moving parts. There are three key segments to building a strong and engaging program: communication, incentivizing, and measurement. Use the following as your guide as you are building your referral program.


This is where most referral programs fail. If employees do not know there is a referral program, they won’t take part in it. There are three best practices for ensuring you are communicating your program properly:

  1. Consistency and transparency through communication are vital to success. Be sure to have a constant drip of messaging going out to your organization, as well as notifications for those who submit referrals. Aliro enables strong referral programs by automating the messaging to employees, serving up referral opportunities that match the candidates in their networks.
  2. Understanding how your workforce communicates and what drives them makes communicating so much easier. The Aliro platform segments messaging to those most likely to know a good fit for a role, increasing the likelihood of referrals.
  3. Word-of-mouth sharing of success is the greatest driver in engagement for referral programs. Through Aliro’s platform, employees get notified when their referral is hired, so they become part of the process, and can more easily share their success with co-workers.


A monetary referral bonus is one of the best methods for incentivizing employees to provide high-quality referrals. Most employee referral programs range from $1000-$2500 depending on the role. If you are trying to find a more custom solution for your workplace there are two options to calculate incentives:

  1. Percentage of Cost-Per-Hire
    • You can calculate cost-per-hire by adding the value of the average time spent and the cost of things like advertising and even your ATS system. Take a percentage of that cost and use it as a reward. You will make that money back when the time-to-hire is reduced and the employee stays longer.
  2. Cost-of-Vacancy or Opportunity Cost
    • There are many ways to calculate the cost of not having a role filled. The most simple option is to take the total revenue of the business and divide that by the number of employees, and then divide that by the number of working days in the year (260). There are variations based on temporary or permanent employment. To avoid the cost of vacancy or opportunity cost, a referral incentive is a minor investment.

There are options for recognition-based referral incentives, however, in our experience, these do not drive as much engagement.


Once you have kicked off your referral program it’s important to give it time to work. There are three best practices for ensuring you are measuring the success of your program appropriately:

  1. Benchmarking your time-to-hire and cost-per-hire is a good step before you launch or re-launch your referral program and will enable you to look back to measure operational success.
  2. Depending on the frequency of open roles and your average time-to-hire you may want to allow for 6 months to 1 year before evaluating success.
  3. You can’t measure the real success of your program until you hire a referral. Retaining that referred employee is one of the greatest measures of success for your program.

As a bonus, create a 90-day check-in survey for your new hires to see if they would refer your organization to someone else. Not only will this information help support your referral program efforts, but it will also give you an overall sense of the strength of your employer brand and onboarding processes.

Still Not Convinced? Referrals Build Diversity and Strength

As we look ahead to 2021 and beyond, referral programs are going to continue to be effective. Whether you already have a referral program and are looking to improve it, or you are starting a brand new one, you’ve taken a great first step at improving your candidate funnel. Referral programs build strong talent pipelines with high retention rates. Managing a referral program can be time-consuming, so look for partners who can help you communicate, track, and measure the success of your program. Don’t narrow your focus to just referrals from within your organization. By incorporating external referrals, you can build a more diverse, stronger team. Diversity is proven to help your business perform better financially. Aliro can be your partner to help you build a strong referral ecosystem that brings in diverse talent. Want to learn more? Schedule some time to speak with us today.