What percentage of your candidates currently comes through referrals?

We ask every agency leader we talk to that question. The answers are typically in the 20% range. This fits with the latest industry research – in Staffing Hub’s 2022 State of Staffing report, agencies rated referrals as one of their most effective lead sources, and about a quarter of employees reported getting their current job via a referral.

But then there are the outliers.

Some agencies get a lot more referrals. We have customers who have built their entire business this way – they’ve never spent a single dollar on job boards! On the other end of the spectrum, some agencies don’t get any referrals at all. Not a single one.

Why is that?

Here’s the secret sauce: To get candidate referrals, you need to be an agency that people want to recommend to their friends and colleagues.

And the hard truth: If you’re not getting referrals, it’s probably because you’re not that type of agency.

But there’s good news: You can become that type of agency.

By improving your contractor experience and your employment brand, you can build a referral culture in your organization. Change isn’t easy, but your efforts will be rewarded – getting referrals will save your recruiters time on sourcing, reduce your spend on job boards, and deliver higher quality candidates to your clients.

Referral program table stakes

Before we get to why people refer their friends for jobs, we need to put up the table stakes. There are three basic referral practices that every staffing agency should implement. If you’re not doing these three things, you’re missing out on quality candidates:

  • Offer a referral bonus. Offering a referral bonus is critical. Research shows that having a bonus in place is an important incentive for getting referrals. But that bonus doesn’t need to be huge. Many agencies are successful at attracting referrals even if they don’t pay large bonuses. And some agencies offer large bonuses and still don’t get referrals. In our experience, $100 is the floor for referral bonuses – anything less doesn’t provide enough of an incentive. Learn more about bonuses in our article “How Much Should You Pay for Candidate Referrals?”
  • Make sure your recruiters are asking for referrals. Asking for referrals should be part of your recruiters’ talk tracks. At a minimum, recruiters should ask every candidate they place for a job. But, to get the most referrals possible, don’t stop there – consider asking after every positive interaction, such as an interview. Even if the candidate isn’t a good fit for the role, they may know someone who is.
  • Promote your referral program consistently. Do your contractors even know you have a referral program? Awareness is key. We recommend promoting your referral program on your website, in your email signatures, on social media, and anywhere else you interact with your audience. Keep in mind that this effort needs to be ongoing, not just something you do occasionally when you’re making a push for candidates.

Why people refer their friends to staffing agencies

You probably get referral requests from companies all the time, for example, every time you buy something online. What’s the difference between the requests you share and the ones you don’t?

Our guess is that it has to do mainly with the experience you had with the company and whether or not you think your network will benefit from the products or services the company provides. The same is true for people referring their friends for jobs.

Aside from the referral bonus, these are the main reasons people refer their friends to staffing agencies:

  • They’ve had a good experience with the agency. If a contractor has a good experience, not only will they come back to you for additional assignments, but they’ll tell their friends as well. This is particularly important in fields like healthcare, where travelers may work with multiple agencies, so they know firsthand how each agency treats their talent.
  • They like their recruiter. Reciprocity is a strong motivator – if you help someone, they want to help you. In high-touch industries (again, healthcare is a good example), the recruiter-contractor relationship is the cornerstone of an agency’s success. The stronger these relationships are, the more referrals they will generate.
  • They want to help their friends and coworkers. People like to be helpful. If they have a friend they believe would benefit from working with your agency, they will make a referral.
  • They want to participate in their community. There’s a saying among software developers: “Your next job will come from someone at your last job.” In industries that have strong networking communities, like tech, referring people for good jobs is part of participating in the community.

When you ask for a referral, you’re asking someone to put their reputation on the line for you. If you’re not getting referrals, it’s likely because your contractors don’t think making a referral is worth risking their reputation with their network.

A last word on referral bonuses

Often, when we talk with staffing agencies about their referral program, they want to focus on the size of the bonus. But the role of money in motivating job referrals is more complex than a lot of people realize. And it’s related to the psychological factors listed above.

Researchers at the University of Nebraska – Lincoln did a study on how the size of a referral bonus impacts the likelihood that someone would refer a friend to their company. Not surprisingly, they found having a referral bonus in place is essential for getting referrals. BUT, their most important finding was that the size of the bonus required to bring in a referral depends on how people feel about the company.

In other words, money is a key motivator, so you should always offer a referral bonus. But, if you rely solely on money, you will have to pay much more for referrals than you probably want to. You can decrease your spend and get more referrals by becoming the type of agency that people naturally want to recommend to their friends and colleagues.

We’re going to be writing a lot in the coming months about how to build a referral culture and become an agency that people want to recommend to others. So, if you haven’t signed up for our newsletter, now would be a good time, so you don’t miss any of our upcoming content. In the meantime, explore our latest ebook on referral program benchmarks and best practices.