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Member’s Tip: Employee referral schemes


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HR Zone member Peter Duckitt explains the considerations of sourcing new employees through existing staff – do personal recommendations really work?

Introducing a scheme where a current employee recommends friends as new recruits can be a useful source of additional candidates. I would not use it as your only candidate resource because there could be potential indirect discrimination issues (depending on the mix of employees that you already have).

Other practical issues are:

  • Make sure that you have an efficient system of recording which employee introduced which person and at what date. You might find the same person being introduced by more than one employee and you need to know who to pay, to avoid bad feeling. These introductions could be a long time apart – so you need to check historical records each time.
  • You might want to consider paying the fee after a performance period (for example, six months). If the introduced individual is still with you at that time, you pay – if not, you don’t. It is difficult to withhold payment if, for instance, the introduced individual is still with you but you are not happy with their performance (your problem to do something about, not the employee who made the introduction) or is under notice (confidentiality).
  • You may need a rule that you will only pay the introduction award to current employees (ie employees still with you at the time the award is due).
  • You will need a rule to exclude payment where the individual has already been put forward by an employment agency (could be up to 12 months previously) because the agency will be expecting their fee. An agency also might need proof if you have taken on someone via an employee introduction who they had subsequently introduced at a later time.
  • Make it your employee’s responsibility to complete a form and get the new recruit to sign that they are happy for their information to be submitted and to be kept on your records and that they have not previously applied to your company. It might also be as well to make it the employee’s responsibility to get the manager’s signature of receipt on the form and to keep a copy if they want proof (should there be a dispute).
  • You need to set out what constitutes an introduction – just the employee’s name and address and signed consent, or a CV or application form, etc.
  • You might need to make clear to your employees that the award is subject to tax, in order to avoid disappointment.
  • Will it apply to all vacancies – temporary and contractor positions as well?


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Introduction scheme


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