Building an Employee Referral Program: Tips for Success

An employee referral program can be a surprisingly effective strategy for building a high-performing team while keeping costs low.

9 min read
restaurant employees at work

You may have heard the terms, “The Great Resignation,” the “Big Quit,” or “Turnover Tsunami.” They all describe the same phenomenon: employees quitting their jobs in droves.

Unfortunately, the restaurant industry is no exception to this current trend. Just when we thought the number of people leaving their jobs had reached an all-time high at almost 4 million in April of 2021, September and November 2021 saw a respective 4.4 million and 4.5 million people quit

With no signs of the Great Resignation slowing any time soon, businesses like restaurants, liquor stores, flower shops, and more must employ new strategies to fill open roles and boost employee retention. Implementing an employee referral program can help. Read on to learn how a well-designed employee referral program encourages business growth — and how to start building your own one today.

How the labor shortage is impacting businesses

Right now, many restaurants and other businesses are dealing with a dramatic labor shortage. In fact, as a result of the Great Resignation (and compounded by the Omicron variant), restaurants have had to modify their operating hours in order to accommodate a very limited staff. In other words, businesses are having a tough time replacing departed employees, which prevents them from catering to customers and bringing in much-needed revenue. 

And even if businesses are able to find new employees, hiring costs remain high. According to Gallup, replacing a former employee costs one-and-a-half to two times as much as the employee’s annual salary. That’s a big hit.

So, what can you do to resolve your staffing crisis while boosting retention rates? One solution is to offer existing employees rewards for bringing in new hires. This will shorten the amount of time it takes to bring qualified candidates in the door, and will ensure that they last longer.

Let’s dive into the ingredients of a successful employee referral program.

Ingredients of a successful employee referral program 

What is an employee referral program? An employee referral program is a rewards program that encourages current employees to recommend candidates for open positions. Ultimately, this strategy helps businesses reduce hiring costs and streamline the recruiting process — in fact, research shows that employee referrals are 4X more likely to be hired than the average candidate. 

What’s more, 45% of employees sourced from employee referrals stay longer than four years, while only 25% of employees sourced through job boards stay for over two years. Not only are you gaining employees who are personally recommended for their skills and likely culture fit, but you’re also boosting employee retention rates in the process. 

Wondering how to establish a successful employee referral program for your small business that incentivizes current employees to recommend new hires? Here are some tips. 

Offer sustained rewards

Gift cards and cash rewards are great incentives for your employee referral program; employees get excited about them, and they’re effective in motivating staff to engage in the referral process. However, for many employees that work minimum wage restaurant jobs, a gift card or one-time bonus won’t fund a higher quality of living. Offering sustained rewards for your restaurant employee referral program can be the most effective way to encourage employees to refer candidates.

For example, you might offer an immediate bonus for referrals followed by additional smaller bonuses every six months. Or, perhaps you could offer a reward package that comes with an extra vacation day or two. As another option, you could offer a cash reward that comes with an exciting experience for employees and their families. Offering a reward that’s more than a one-off can be an effective way to show employees that you value them, their hard work, and their recommended candidates. 

Recognize employees publicly

Recognition is an excellent source of motivation. When you congratulate employees for referring great candidates, it boosts morale and incentivizes them to keep up the good work. Create a sign or whiteboard to display in the kitchen of your restaurant or the back room of your storefront, or send out celebratory emails when an employee referral becomes a hire. Aside from cash and gift cards, the most rewarding benefit of your employee referral program might just be pride. 

Promote friendly competition 

A little bit of competition never hurt anyone. For competitive employees, framing your employee referral program as a friendly competition can be a great source of motivation. Maintain a leaderboard that keeps track of successful employee referrals, and reward workers for coming in first, second, and third place. Not only is this a good incentive, but it’s also a way for employees to bond and have fun.

Establish an automated, user-friendly system

You might have considered implementing an employee referral program in the past, but decided that the process was too complicated to manage with so much already going on at your restaurant. Keeping track of who referred who, who’s been rewarded, when you’ve reached out to candidates, and more can sound daunting—if you don’t have the right system.

Digitally automating your employee referral system can be helpful for you on the management side. With an automated process that links your internal referral process to your external recruiting process, you can streamline communication between applicants, increase hiring transparency, easily post job listings, and strengthen your applicant-to-hire conversion rate. An automated system also helps employees easily refer candidates, track progress, and calculate rewards. 

How to design a successful employee referral program flyer

With all this said, how do you spread the word about your employee referral program for your business? One effective strategy is to create an employee referral program flyer and post it in a highly visible location. To get employees fully invested, your flyer has to be clear, informative, and visually pleasing. It should include: 

  • The bonus or incentive. This is what employees are going to care about most. Make sure the incentive is clearly spelled out on the flyer to drum up excitement among your staff.

  • The details. Will your program last for a month? Six months? Is there a limit to how many rewards you’re giving out? If there are any guidelines or limitations, make them clear on the flyer.

  • The logistics. Whether or not you choose to automate your employee referral program, it’s important that your team knows how to participate. For example, do they need to fill out a written form to submit referrals? Can they register for the referral program online? Make sure your flyer clearly outlines all necessary instructions.

As a general rule, it’s important to balance information with visuals. Don’t saturate the page with words, and make sure that any pictures and colors are inviting without being distracting. Finally, hang your flyers in places where you know your employees will see them—in the kitchen, in the break room, or behind the register.

How an employee referral program helps build community

Above all, an employee referral program is an impactful way to combat the labor shortage and boost employee retention rates. But in addition, it helps build a close-knit community within your workplace. When employees work with their friends—people they can trust, people who make them laugh, and people who they can count on—they’ll be much happier coming to work every day. 

And in the end, that’s what matters most. For more tips on keeping employees happy, see this blog post on how our restaurant partners build community.


Diana Donovan
Diana Donovan


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