According to new data from Clutch, the B2B ratings and reviews firm, more than half of companies with an employee referral program (55%) say it reduced hiring costs. On average, it costs $4,129 to hire a new employee, according to data from the Society for Human Resources Management. Employee referral programs can decrease that cost. 

Due to the COVID-19 pandemic, many companies in the U.S. are not currently hiring. When the economy reopens and businesses seek to hire again, employee referral programs may be a key recruiting strategy, especially if businesses are working on a newly tightened budget.

Anna Papalia is the CEO of ShiftProfile, an interviewing consultancy. She says that for one consulting contract, she was responsible for recruiting and hiring $7.2 million in yearly salary.

"We relied heavily on a generous employee referral program and leveraging our internal networks," Papalia said. "I believe one of the best and most reliable talent pipelines is a referral program." She states that an employee referral program for the project saved her company upwards of $1 million.

Referral Programs Reduce Hiring Timeline

Currently, 46% of companies say they spend 1 month or less on their hiring process. Key industries on the front lines of the COVID-19 pandemic, including e-commerce and healthcare companies, are facing a sudden increased need for workers, including some roles requiring specialized skills. Referral programs may be able to get the employees they need in the door quicker.

Ollie Smith, CEO of Card Accounts, a payment data merchant service provider, said he hires referred candidates twice as fast. It typically takes 4-5 weeks for Smith to vet and hire an employee, but Smith can skip certain stages and hire referred candidates in as little as 2 weeks.

Referred Employees Stay at Companies Longer

Nearly half of companies with referral programs (49%) say that referred employees stay at the company longer. These hires may better integrate into a company's culture and can potentially bond faster with co-workers, helping improve their long-term engagement.

"It's likely that an employee who is referred already has a close connection with the person who referred them," said Joey Price, CEO of Jumpstart HR, an outsourcing consultancy for small businesses and startups. "Working with people you like is important because you're more open to positive and constructive feedback, attempts at team building, and buying into the corporate vision."

Overall, employee referral programs can save companies time and money on their recruiting needs.