Are employee bonuses worth it?

tokengo

Can an employee referral bonus make a difference in your employee referral program? It’d be great if employees were always happy to help. But, most companies think that incentives are necessary.
There are many different types of employee referral bonuses. They’re usually offered as cash, ranging from $1,000 to $3,000, sometimes reaching up to $10,000 in the tech industry. They can also include trips, gifts, vouchers, time off or other forms of reward.

Types of employee referral bonuses:

Sometimes though, companies offer unique rewards. Here are two notable examples:
Thoughtspot announced their exceptionally high $20,000 employee referral bonus in 2014. Employees and ‘friends of the company’ can win the reward. Their bold move made an impact and brought in three big hires in the first few months after its launch.

What constitutes an employee referral bonus:


The majority of companies offer cash. But, no matter what the reward is, most referral programs are similar in a few ways:

Companies pay out only if referred candidates are hired (or if they get an interview)
Most often, referred candidates have to work for the company for more than a couple of months before referrers get their full incentive. According to a 2014 WorldatWork survey, 71 percent of companies paid their employee referral bonus in full after an employment period between 45 days and six months.

Sometimes though, companies opt for splitting their payouts into parts. For example, for a total bonus of $1,000, referrers could receive $200 if their candidate gets an interview, $300 more if they’re hired and the remaining $500 if their candidate stays for more than three months. This ‘tiered’ reward system can work with non-monetary rewards too. For example, Groupon mentions a tiered system in their employee referral program video:

Companies won’t pay referrers who referred contract or temporary employees Usually, only referring permanent employees (whether full-time or part-time) count for referral bonus programs. Executives and HR employees aren’t usually allowed to receive a referral bonus This is a common stipulation because executives and HR team members have control over who gets hired.
So, should companies drop employee referral incentives?

Employee referral incentives can be useful if used correctly. For example, building tiered reward systems or offering higher rewards for harder to fill positions can motivate employees to make more quality referrals. But, spending too much time on finding the perfect incentive has a downside. If referrals become excessive, they might harm your productivity in the long term. This is because people tend to refer people who are similar to them. This kind of homogeneity can damage companies. Relying on referrals too much robs companies of the long-term performance gains of diverse teams. Companies can still harness the power of referrals, but only up to a point. You don’t have to look for a newsworthy employee referral bonus. After all, incentives are only a small part of a successful referral program.