Employee referral policy

Employee Referral Policy With Referral Policy Sample Template

Employee referral policy strengthens the company’s workforce through trusted employee recommendations 🤝. Designed as a flexible blueprint, adapt this to fit your organization's unique hiring needs and enhance the team's potential! 💪🚀.

What is an employee referral?

Employee referral means an existing member of the team/organization vouches for a potential candidate for an open role. The referrer, usually an integral part of the organization inherently understands the culture and dynamics, making their recommendation highly valuable.

Much like a trusted book or movie recommendation, a nod from a current team member often leads to discovering individuals who fit seamlessly into the organization's ethos. Beyond its cost-effectiveness, this approach brings a personal touch to the recruitment process. 

To acknowledge the effort and trust, a token of appreciation, often in the form of a bonus, is extended when the referred candidate becomes part of the community. This is where the Employee Referral Policy program kicks into action.

The Employee Referral Policy functions as the rulebook, ensuring all stakeholders are on the same page. It provides clarity, maintains transparency, and ensures fairness in the entire process. While the organization places immense trust in its team's judgment, it also believes in the importance of having a clear framework to uphold the integrity of the referral system.

Purpose of an employee referral policy

The Employee Referral Program Policy serves as a guide to foster these connections. It aims to streamline the referral process, showcasing the importance of recommendations from our employees. We value and trust our employees' insights, believing they have an intrinsic understanding of what's best for the organization.

By establishing this policy, we ensure a consistent and active influx of potential candidates for open positions. More than just a recruitment strategy, this policy also functions as a gesture of appreciation, rewarding our employees for introducing qualified and compatible candidates from their networks.

Scope of an employee referral policy

The employee referral program policy applies to every employee of the organization up to the Assistant Manager level. However, this excludes the Senior level management team, the Recruitment team and others who are involved in the recruitment process.

Download Employee Referral Policy Template

What does an employee referral policy underline?

The employee referral policy underlines the following aspects - 

  1. An Employee Referral Policy emphasizes the idea that current employees can suggest prospective candidates who align with a job's requirements. 

  1. Once recommended, these candidates are expected to complete the same rigorous recruitment process as any other applicant. 

  1. While the referring employee's participation is restricted to merely introducing the candidate by submitting their resume, the policy further outlines the specific rules and detailed procedures of the referral system. This includes how referral bonuses are determined and rewarded. 

  1. Additionally, the policy also sheds light on any unique situations or exceptions within the referral mechanism, ensuring clarity for all parties involved.

Employee referral process & referral bonus

The Employee Referral Program’s process and bonus system operates in the following way -

👉The employee can submit the referral through the employee referral portal which provides details on the candidate’s name, job role (for which the candidate is referred to), contact details and the resume.

👉The HR will review the resume contact the eligible candidate and schedule the interview. If selected, the referred employee will be notified.

👉To be eligible for a referral bonus, an employee must introduce a candidate who is not only hired but also completes the initial phase of their new role successfully. 

👉The referring employee should be still a part of the company when their recommended candidate completes their first 90 days. If they left before this milestone, they would not qualify for the bonus.

👉The bonus amount is not awarded immediately. Once the new hire passes the 90-day mark, the bonus amount for the referring employee will be processed in the next pay cycle, ensuring they see the reward in their paycheck without undue delay.

👉The bonus amount is taxable just like other components of the salary. The requisite amount will be deducted as tax withholding, ensuring compliance with financial regulations.

👉The bonus is applicable only if the referred candidate is recruited within nine months of their introduction to the company.

👉The bonus isn't a flat rate for all positions. Depending on the nature of the job – whether it's an hourly role or a salaried position – the bonus amount differs. The exact amounts would need to be filled in, but it's worth noting that these too will be subjected to the standard tax withholdings.

Important points to note🎯:

  • Employees can make multiple referrals, emphasizing the quality and suitability of candidates. A preliminary assessment of the candidate's background is recommended for alignment with company values.
  • In instances of multiple referrals for the same candidate, precedence is given based on the timestamp of the referral's receipt by HR.
  • Candidates engaged with the Talent Acquisition team within the preceding 6 months are excluded from the referral process.

Non-compliance of the policy

Violations of this policy will be addressed by HR. Employees are expected to uphold ethical standards during referrals. Any breaches may result in disciplinary actions and forfeiture of referral bonuses. If bonuses have been disbursed, the Company will reclaim them, either via payroll or other means.


This is a general guide, not a legal document, and may not cover all laws under the Indian Labour law. Neither the writer nor Pazcare will be liable for any legal consequences arising from its use. Consult with a legal professional to ensure compliance and adapt this guide to your business needs.

Access Employee Referral Policy Template

Your HR policies kit has landed in your inbox!

Your HR policies kit has landed in your inbox!

Your copy of the HR policies has been sent to your email. Thank you !

No items found.

Access Employee Referral Policy Template