The Benefits of Employee Referral Programs for Home Service Businesses

Originally published in October 2021. Last updated on April 1st, 2025.

If you have an employee who consistently does quality work, shows up on time, and gets positive feedback from customers, chances are you wish you could hire ten of them. 

Since you can’t do that, the next best option is to find similar candidates through an employee referral program. That way, your star employees will be motivated to refer their connections to you, like former colleagues, team members, or friends who share their work ethic and skills. 

Learn more benefits of employee referral programs to find out whether you should add them to your service business’s recruitment strategy.

Employee referral program pros

Adding an employee referral program to your service offers many benefits, including:

1. Stronger candidates

From the skills and experience required to company culture, your current employees know what it’s like to work for you. This makes them more likely to refer candidates your way who have what it takes to do the job well and fit in with your existing crew. 

Plus, they can help support, train, and onboard the referrals you hire, getting new employees up to speed faster. 

2. Reduced turnover

Turnover often happens when you or a new hire figure out they aren’t a fit after they start working for you. This could be because the culture isn’t what they expected, the job responsibilities aren’t a match, or they don’t mesh well with the rest of the team. 

When you have an employee refer a friend or professional connection to you, chances are they’ve already gone over these details, which means fewer surprises and less miscommunication. 

Referred candidates usually have a better understanding of the job requirements, company values, work environment, and expectations before they step through the door. And they have an existing support system in place through your shared connection. This makes them more likely to stay on longer, becoming valued and long-term staff members.

3. Faster hires

Hiring a new employee from a job posting is a lengthy process. You have to create and post a job description, wait for potential employees to apply, and spend precious time reviewing resumes and interviewing candidates. Many who may be unqualified and the wrong fit. But when you use an employee referral program, you already have a much stronger hiring pool of potential candidates to leverage. 

This means you can cut out some of the steps in your recruitment process, like advertising for a job, reviewing countless resumes, and scheduling multiple interviews. 

And having an existing reference as well as a job candidate who already knows about your business also makes the hiring process faster and more efficient.

4. Less expensive hires

Advertising jobs and taking time to review applications, conduct interviews, and vet candidates costs money. The longer the hiring process, the more it costs. 

Since employee referral programs help cut down on hiring timelines, it can mean you spend less money looking for the right person. Then, you can use your savings to fund your employee referral program.

5. Happier teams

Having a friend on the job boosts employee engagement and satisfaction and fosters a more positive work environment. When employees refer people they trust, they’re more likely to put effort into making them feel welcome and capable. 

In turn, referred employees are often motivated to make a good impression and contribute to the team from the get-go to prove their worth and show their gratitude. 

This builds a foundation of mutual support, accountability, and better morale, making for happier, more engaged teams.

6. Better reputation

Building up your business’s reputation as an employer takes time and effort. Employee referral programs help speed up the process through word-of-mouth marketing from existing staff members. 

And when current staff members recommend you across their social media pages and to friends and family members, it has the potential to reach new customers as well as job candidates. 

That boosts your reputation all around, positioning you as someone people want to work for and impressing prospective clients by showcasing how happy and engaged your staff members are.

Employee referral program cons

Employee referral programs can do a lot of good for your service business. But there are also some downsides you should consider before making one of your own, such as:

1. Smaller hiring pools

While employee referral programs give you access to more targeted hiring pools, they’re also smaller. You may miss out on candidates with more experience, new skills, or different perspectives, limiting your ability to access fresh ideas or diverse backgrounds that could benefit your business.

2. Interpersonal issues

When coworkers who know each other work well together, it can be great. But mixing personal and professional lives is always a risk. If they have a falling out or disagreement outside of work, it could impact their performance on the job. 

Then you’ll have to find a way to keep things running smoothly, either by mediating a conversation, putting them on separate schedules, or changing up their responsibilities to keep them apart. 

This won’t just affect the employees who are involved, either. It can impact your entire team, lowering morale and making them feel stressed out or demotivated.

3. Increased costs

Hiring employees always comes with costs, but so do employee referral programs. If you’re using a referral program on top of traditional hiring methods like making a job posting, your costs will go up. 

For example, referral bonuses will be an additional expense on top of the time it takes to vet applications, interview potential hires, and onboard your chosen job candidate. 

And if you don’t offer worthwhile referral bonuses, your employees won’t be motivated to use your program.

1. Set a goal

What do you want to achieve with your referral program? Are you looking to fill specific positions quickly, improve the quality of your hires, or boost employee engagement? 

Understanding the motivation behind your employee referral program will help you structure your program more effectively and provide you with goals you can use to gauge its performance.

2. Define guidelines

Every successful employee referral program needs guidelines, such as:

• Which positions are eligible for referral rewards: Do referrals apply to all open jobs, including entry-level positions, or only to hard-to-fill positions?
• Who is allowed to participate: Is your referral program open to all employees or only those not in management or supervisory roles?
• How referrals should be submitted: Like using a physical form, via email, or through software. 
• What information you need for each referral: Such as a resume, cover letter, and references. 
• What results in a bonus: Do employees get a reward for every referral that gets an interview or only once a new hire passes a probationary period?

3. Pick a reward or incentive

The employee referral reward or incentive you offer will determine the success of your referral program. Based on your budget and goals, you could offer staff members: 

• A $500 cash bonus
• A gift card for a restaurant, store, or activity
• 3 additional vacation days
• High-end tools or gear
• Company merchandise 
• A donation to the charity of their choice

You should also think about how you want to structure your rewards. 

For example, you could offer employees a branded mug for each referred application, a $250 gift card for a successful interview, and 3 personal days once a new hire finishes their probation. 

Or you could just offer a single reward at a specific time. Like $1500 cash for every new hire who stays for at least 6 months. 

Pro Tip: Ask staff members what would motivate and engage them before making a decision. That way, you can develop an effective employee referral program specific to your team.

4. Tell staff about your referral program

Your team won’t be motivated to send referrals your way unless they know your referral program exists. 

Communicate the details to staff members by: 

• Holding a meeting to get everyone up to speed
• Creating a standard operating procedure (SOP) for them to follow for referrals
• Including the information in your onboarding documents
• Providing access to program specifics where employees can access it, like in a shared folder
• Clearly explaining how it works
• Updating them with any changes

5. Ask for referrals

Once you’re ready to try out your referral program, ask employees to send potential candidates your way the next time you have a relevant job opening. 

You can give them ideas for how to attract new hires from their networks, like: 

• Sharing the job posting on their social media pages
• Reaching out to previous colleagues or experienced friends or family members
• Spreading the word in their professional communities or neighborhoods online

6. Track and manage referrals

Once they start rolling in, track referrals so you can keep up with who they came from and how far they made it in the hiring process. 

That way, you’ll know when and how to reward employees. And you can compare your results to the goals you set to determine whether your program is working as you intended.