How much should you pay for Employee Referral bonuses?

May 11, 2022

Deciding how much to pay for Employee Referral bonuses can be difficult so Employee Referrals is here to offer guidance. 71% of employers see cash bonuses as the most effective employee referral incentive so that will be the main focus of this article. Let's go over a few questions to consider and then get into some real-world examples.

What is your acquisition cost for other sources?

Acquisition costs can serve as a baseline for setting a referral bonus. Once the cost for each position has been determined you can decide what percentage of that you are willing to pay out as a referral bonus. Employee referral bonuses are only paid for successful actions which makes scaling the program up and down easy. If there is greater demand for talent you can raise the bonus to help ramp up marketing efforts. If there is ever a slow down in hiring referral bonuses can be adjusted to reflect the decrease in demand.

What type of position is it?

Bonuses will be larger for specialized when compared with entry-level positions but there are other considerations to factor in as well. For example, we have a company that works in the automotive industry and they found that referrals work especially well for high turnover positions. On average referral hires were staying twice as long as those hired through other means. Lower turnover saves the company quite a bit in training costs. So even though it was an entry-level position they were willing to pay a bigger bonus because of the extra value it added.

How quickly are you planning on paying the bonus?

As a general rule of thumb the quicker the bonus is paid out the less you need to offer. This is great news for companies on a tight budget. Clients that are offering rewards in the $1,000 - $10,000 range often wait until the referral hire has been with the company two or three months before paying out the bonus. This can seem quite distant when many of us are used to instant gratification. If you are offering smaller rewards consider paying out the bonus much quicker to keep excitement levels high.

A software development company chose to offer the best of both worlds. They would offer a referral bonus of $5,000 for programmers. They would also run promotions where they gave out $100 gift cards just for submitting a referral. They found that their employees were getting more excited about the $100 gift card than they were about the large bonus that was three months out.

What is the cost of a position remaining open?

Vacancies in key positions can be costly to the company. One of our clients does a fair amount of work as a government contractor. In order to make good on these contracts, they need to hire a variety of specialists. Some of these positions can be quite hard to fill and without the right talent on the team, they could lose the contract. In cases like these spending $10,000 on a referral bonus is a good deal. Whenever a position becomes a high priority, they will mark it as a hot job in our system which gives it priority placement on the referral portal and in marketing campaigns.

A few real-world examples

Referral bonus numbers are hard to come by since most companies only post these numbers on internal sites.  To help out we crunched some numbers from our database which consists of client companies across many industries. In 2021 the average referral bonus that our clients paid out came to $1,457 per hire. Here is a small sample of referral bonus averages across different positions.

Average bonus  per hire - Job title or key word  (Range)
- $2,868 - Registered Nurse ($200 - $10,000)
- $1,169 - Licensed Practical Nurse -  ($200 - $3,000)
- $589 - Customer Service ($250 - $1,250)
- $1,500 - School faculty ($1,250 - $5,000)
- $1,291 - Sales ($250 - $5,000)
- $1,721 - Engineer ($300 - $5,000)
- $1,251 - Automotive technician ($250 - $2,500)
- $1,690 - Pharmacy Technician ($600 - $2,500)

As you can see averages vary from position to position and industry to industry. At Employee Referrals, we offer our clients guidance and help to build a successful system. If you are interested in working with an experienced team to improve your employee referral program let's find a time to chat.