Cutting costs with a DIY headhunter

By KATIE TAYLOR FOR MAILONLINE
Updated: 19:00 EST, 5 July 2004

DIY recruitment can pay dividends for a company and its staff. The employer saves on agency and advertising costs, and the employee who recommends a new staff member receives a reward.

Employee referral schemes, where members of staff recommend friends, family or former colleagues for jobs, have proved to be one of the most successful recruitment methods, second only to using consultancies.

However, research among investment banks by consultant Penna has revealed that although 80% have schemes in place, only 12% of these have hired through them.

Penna director Gary Browning says: 'Staff referral schemes are popular in times of job or skills shortages.'

Travel company Flight Centre UK, which has 70 stores nationwide, started promoting its scheme a year ago. Client relationship manager Claire Paisley, 36, has referred three new employees, including a cousin, a former colleague and a friend of a friend.

Claire, from Hammersmith, west London, says: 'I wouldn't refer just anybody. I need to know that they will fit in with the company culture.'

The reward for referring recruits is £500, half paid immediately and half three months into the newcomer's contract. An expensive plasma television is also given to the person who makes the highest number of successful referrals over a year.

Smaller firms are the worst at offering incentives, according to Tim Anderson of the Academy of Chief Executives. 'If small and medium firms would pass on the savings, more people would take part,' he says. Referral schemes can also serve to improve staff morale. Some companies even offer non-cash rewards, such as theatre trips or family days out, which employers say staff appreciate as being more personal and fun.

But Steve Huxham, chairman of the Recruitment Society, warns: 'People tend to recommend people similar to themselves, which can restrict diversity.

'These schemes can be useful, but they need to be applied carefully.'