Referral Bonus Definition

Term Definition
A referral bonus is a sum of money offered to employees who refer people to become employees of the organization, company, or business. Some businesses offer a one-time lump sum bonus after a specified period of employment by the referral, while other companies offer smaller bonuses after specific employment anniversaries are achieved. The referral bonus can be in any amount that a company determines will provide incentive for employee recruitment efforts.

Extended Definition
Referral bonuses are an option that an organization may choose to offer as part of a recruiting strategy. While many do not offer an across-the-board bonus for every available position, they may for certain specialized areas. In fact, the harder it is to find qualified employees for a position, the greater the odds of a referral bonus to employees who recommend qualified professionals to fill those positions. However, jobs that are easier to fill or that require fewer skills may offer a lower dollar amount in the way of a referral bonus, if one is offered at all.

There are some unique benefits for businesses offering referral bonuses especially those that require a certain length of service by the referral in order for the bonus to occur. Employees must be familiar with the people who are referred, so they are likely to refer candidates who they believe will provide quality work. They are also likely to refer those who will provide stability and stay long enough for them to collect the bonus. Finally, most people are only likely to refer people they like well enough to work with day in and out, leading to greater harmony in the workplace.

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Is an Employee Referral Program Right for Your Business?