The price is right

Employee referral programs increase your company's stable and boost your earnings

Undeniably, a tight labor market affects companies looking to expand their talent pool. But what does a national shortage of qualified workers mean to you, the happily employed professional? Actually, it could mean a lot. How does a trip, a brand new car or a sizable sum of money sound? Well, those are some of the things you possibly stand to gain by participating in your company’s employee referral program, which pays you for recommending qualified new hires.

“The belief is that the best recruiters for technical people are other technical people,” says Jane Weizmann, practice leader for strategic rewards for Watson Wyatt Worldwide, a human resources consulting firm in Bethesda, Maryland. “They know what the qualifications are and who will fit in with the company.”

Last year, PricewaterhouseCoopers employees who made successful referrals were eligible to win a pair of mountain bikes, a Colorado Outward Bound trip and a Kawasaki Jet Ski. Software Technologies Corp. (STC), a Los Angeles-based provider of integration technology, several months ago offered employees who made successful referrals chances to win a new blue BMW Z3 sports car. Now they offer cash bonuses.

But, by far, cash is the most popular incentive, with bonuses of $100 and more. The chance to earn extra cash motivated Eric Lee, a software engineer, to refer two friends to Tellabs, a telecommunications company in Lisle, Illinois. The two successful referrals have resulted in more than $6,000 for Lee.

“I only refer people who can help the company,” says Lee, who works out of the company’s Ashburn, Virginia, office. Last May, Lee referred a former co-worker from a previous employer. He knew his friend had the skills, background and personality to fit in at Tellabs. After his friend had been with the company for three weeks, Lee collected $4,500.

This was Lee’s second employee referral for the company; he had also earned $2,000 for referring a colleague under Tellabs’ previous referral program. Under that one, Lee’s referral had to stay with the company for at least 90 days.

Companies with referral programs generally provide employees with job listings; some companies only offer the incentives for specific types of jobs that are hard to fill. The human resources department usually provides instructions on how to process the referral’s résumé and application. Many companies require that the referral stay with the company for a certain length of time, for instance, 90 days, or in the case of Tellabs, three weeks, before you can claim your bonus.

Even if your company doesn’t have a formal reward system in place, referring someone who turns out to be a success can still pay off in the long run for you, especially if you’re already a stellar performer. Lee offers some pointers on how to do it right:

  • Make sure potential candidates have the necessary qualifications. This isn’t about bringing friends on board for friendship’s sake. Do your referrals really have the skills to do the job? In both cases, Lee referred people he thought could make a difference quickly, and they were
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