Employee referral scheme policy

Our employee referral scheme policy creates a set of detailed eligibility criteria for entitlement to an introduction bonus where an existing employee successfully recommends someone for employment. Referral schemes can, however, create a lack of workplace diversity and will seriously limit your pool of job applicants if you don’t still advertise more widely.

Recruitment cost saver

One way of trying to cut down on expensive recruitment costs is to introduce an employee referral scheme. A scheme of this nature enables existing employees to refer their friends, family members or personal contacts (e.g. former worker colleagues) for prospective employment. If the referred person is then subsequently recruited as a result of that introduction, the referring employee receives a one-off introduction bonus (which is fully taxable like salary), normally no more than about £500. This recruitment method can be a lot cheaper than using recruitment agencies or running advertising campaigns.

Policy provisions

Our Employee Referral Scheme Policy includes a number of key provisions setting out the terms of the scheme, including that:

• the bonus is only payable once the referred person has successfully completed their probationary period (or any extension of it)
• the bonus is payable pro rata where the recruitment is either of a part timer or an employee on a fixed-term contract of less than two years
• the scheme is limited to specific vacancies rather than speculative applications - this should stop you being inundated with applications and also encourage employees to consider the person’s suitability for the particular job role
• it needs to be made clear at the time of the job application who is the referring employee and that it’s a referral under the scheme - retrospective referrals won’t be accepted
• recruitment will still fully comply with your normal recruitment procedures and your equality, diversity and inclusion policy, i.e. you’ll still select the most suitable person for the job
• the bonus will be paid on the next available payroll date after the referred person successfully completes their probationary period.

It’s up to you how far you want to retain or change these provisions. We’ve included a provision enabling you to amend or withdraw the scheme at any time, or to change the amount of the bonus.

No bonus due

We’ve also listed various circumstances when a bonus won’t be paid, including where:

• the referred person has previously been employed by you, or applied for another job with you within the last year
• the referred person either resigns or is dismissed before their probationary period is up
• the referring employee or the referred person are serving notice, or no longer on your payroll, on the due date of bonus payment
• the referring employee is involved in the relevant recruitment process for the job.

Potential pitfalls

If you rely too much on this method of recruitment, it’s likely to perpetuate any existing imbalances in the composition of your workforce. For example, if your workforce is comprised predominantly of people from a particular racial group or young people, you’re far more likely to see referrals of job applicants who have similar characteristics. This could lead to accusations of discrimination. In addition, if your recruitment or equal opportunities policies undertake that you’ll advertise all vacancies both internally and externally, you’ll still need to do this, so your costs might not be any less. In any event, this recruitment method isn’t ideal for senior or specialised/technical posts - those are best served by open competition to give you a wider pool of job applicants.