Employers Are Turning Workers Into Recruiters

LOS ANGELES — Matthew Chan was surprised and ecstatic when he won a Mercedes-Benz SLK 230 Kompressor sports car as well as a big chunk of cash for referring his sister Elisa to his company.

A 27-year-old technical support engineer working with Electronics For Imaging Inc., Chan is one of many people in the booming high-tech economy who have taken advantage of non-salary compensation ranging from cash to cars offered by companies for employee referrals.

More and more businesses, especially in the technology sector, are looking to their workers to find good candidates.

Applicants hired this way are more reliable because they already have a good idea of the company from the employee, said Charles Peck, a compensation specialist with the New York-based Conference Board, a private research group.

“It’s a bonus to the employee, and it’s a much cheaper way [to hire],” he said.

Such gestures also help boost loyalty, Chan said, adding it felt good to know the company took care of its staff.

In addition, the traditional methods of hiring people, such as advertising in newspapers or going through headhunters, is no longer seen as cost-effective.

Overall, the use of non-salary compensation is growing among employers, according to a survey released Monday by the Conference Board. Such rewards are cheaper because they are not tied to permanent wage increases, Peck said.

*

For successful referrals, Electronics For Imaging, a maker of software that connects copiers, pays $20,000 for a directorial position, $10,000 for a managerial post and $5,000 for other jobs.

Brio Technology Inc., a provider of analytical solutions for Internet companies, has an employee referral program called “Refer a Star.” The employee gets $7,500 if the candidate recommended is hired on a salaried basis or $2,500 if hired on an hourly basis.

The company also holds special promotions from time to time when it gives away a Jeep Wrangler or $15,000 in cash. Also, everyone whose referrals are hired gets to put his or her name in for an end-of-the-year draw for $50,000 toward the purchase of a car of the winner’s choice.

One-third of the employees hired in the last two years have been referrals, Brio said.

Wind River Systems Inc., another high-tech firm, offers sums ranging from $500 to $5,000 for successful referrals.

“The nice thing about this is that typically the employee knows the candidate and has already sold the company to them,” said Nancy Raab, director of human resources at Brio. She noted that such hires were also quicker to fit in.

This was a much cheaper hiring solution because headhunters typically demand a fee equal to 25% to 30% of the candidate’s gross salary, she said.

*

Although many start-ups depend heavily on employee referral programs, they are common at even big, established firms.

“Everybody is doing anything as creative as possible to attract good people,” said Jan Smith, Electronics For Imaging’s vice president of marketing and human resources. “Our best employees come from referrals. We get high-quality candidates through our employee referral program, and also it costs us less.”

Running a full-page color ad in a newspaper could cost about $50,000, and fees for headhunters range from $20,000-$30,000 per person, she said.

Electronics For Imaging is trying to fill a lot of positions, Smith said, and using referrals gets it significantly better candidates.

“Since the company began this program in May, we get about 300 referrals a month, of which about 27 are hired,” she said.

Previously, Electronics For Imaging offered $3,000 and a trip worth $1,500, but this was not a very popular program.

“We used to get only four referrals a month. The trip did not attract many people,” Smith said.

Now Electronics For Imaging also gives away a Mercedes-Benz every month in a draw among everyone who has made a successful referral, so those who missed out the previous month get another chance to drive one home.