The Impact of Employee Referrals on Employee Retention

Tawfiq Abu-Khajil

Co-Founder

July 11, 2024

2 min read

How to calculate employee retention?

To calculate employee retention, divide the number of employees at the end of a specific period by the number of employees at the start of that period. Multiply the result by 100 to get the retention rate percentage. Subtracting the retention rate from 100 gives the turnover rate.

In today's highly competitive job market, organizations face numerous challenges in attracting and retaining talented employees. As companies strive to build a high-performing workforce, they are increasingly recognizing the significance of employee referrals as a powerful recruitment tool. However, the benefits of employee referrals extend beyond the initial hiring stage.

1. Referral Hires stay 70% Longer than Non-Referral Hires

In a study conducted over 50 companies and 90,000 employees, results showed that referrals stayed at their company 38 months. Whereas non-referral hires stayed 22 months.

2. The Impact is Bigger in High-Turnover Industries

The study showed that while referral hires in low-turnover industries stayed 51% longer, those in high-turnover industries stated 122% longer. This led to a 41% reduction in costs associated with backfilling positions.

3. Employees Who Refer Stay 20% Longer

The study also showed that employees who submit successful referrals tend to stay longer at the company. We anticipate this is due to strengthened trust and team cohesion between existing employees and colleagues they recognize.

Full study through this link.