What’s the right amount for a referral bonus? (Spoiler alert: Money isn’t as important as you think.)

This is one of the most common questions we get, especially from staffing agencies launching a referral program for the first time.

Obviously, your bonus needs to be high enough to incentivize your ambassadors to send their friends your way. But, you don’t want to pay more than you need to. So, how do you find that sweet spot?

There is not a single referral bonus amount that will work in every situation. The right amount for your agency depends on several factors:

  • The industry vertical
  • The position you’re trying to fill
  • What your competitors are offering
  • How your contractors feel about your agency

Let’s take a closer look.

The industry vertical

At a very broad level, the most important factor determining referral bonus amounts is the industry vertical.

The chart below shows the average referral bonus payouts by vertical for agencies using the Staffing Referrals automated referral management platform. As you can see, referral bonuses for healthcare and technical / scientific roles can reach into the thousands of dollars, while bonuses for administrative and industrial roles are typically a few hundred dollars.

Source: Referral Program Best Practices & Benchmarks

The position you’re trying to fill

Your referral bonus amounts may also depend on the position you’re looking to fill. For example, if you’re asking for healthcare candidates, you might offer a higher reward for referrals to registered nurses and licensed practical nurses than you would for a certified nursing assistant.

A word of warning: Offering different bonuses for every role will confuse (and probably frustrate) your ambassadors and your recruiters, which will make your referral program less effective. We recommend standardizing bonuses as much as possible within your departments.

What your competitors are offering

As you know, competition for candidates is fierce, especially in the current market. We highly recommend you research your top competitors to find out if they offer referral bonuses – and then meet or exceed those offers.

How your contractors feel about your agency

A big mistake many staffing firms make with their referral programs is thinking it’s all about money.

It’s not.

In fact, if you make it all about money, you’ll pay a lot more for referrals than you have to.

Here’s the supporting evidence:

Researchers at the University of Nebraska – Lincoln looked at the impact of both referral bonus amounts and employees’ attachment to their company on the likelihood those employees would make a referral.

What they found:

  • People are more likely to make a referral when a bonus is offered than when it’s not.
  • Larger bonuses are more motivating than smaller ones, but only to a point. In the study, there was no difference between offering $1,500 and offering $3,500.
  • If people feel that making a referral is risky (for example, that their reputation will suffer if the referral doesn’t work out) or if they are not emotionally attached to the company, it will take a very large bonus to get a referral.
  • On the flip side, if people are emotionally attached to their company (e.g., they identify with the organization and feel that the company’s values match their own), large bonuses aren’t necessary.

The take-home message: If you have a positive referral culture – meaning you prioritize the contractor experience and focus on developing good relationships – people will want to refer their friends to work with you. If you don’t have a positive referral culture, you will have to offer very large bonuses to compensate.

So, as you design your referral program, ask yourself, “What is my agency’s referral culture?” and “What can we do to make it better?” Focusing on these questions will save you a lot of money on referral bonuses – and make your organization stronger overall.