When large international companies are trying to build a global employee referral program, it’s not easy. There are many potential pitfalls that a company can fall into. With different customs in every country, rolling our policies for international companies can be difficult. Look at our past posts on pitfalls of an employee referral program part one and part two.
How to govern your global employee referral program
One of the challenges companies encounter is how to govern the employee referral program in different locations. It’s difficult to create one central plan when all locations around the world are doing different things. Usually companies will have a centralized centre of excellence that will govern the employee referral programs, but local HR representatives will try to have customs from their location implemented in the global employee referral program to better fit their employees.
Currency is not the same everywhere
Probably the biggest issue in creating a global employee referral program is how to compensate employees. This is a problem for companies as the value of certain things such as currency are not the same throughout the world. For example $1,000 Canadian is equivalent to about 60,000 Indian Rupees. Take a look at this currency rates conversion table for rates around the world. Our advice is to factor in inflation when looking at currency. Being consistent across the board (i.e. what is the cost for 3-4 meals at a good restaurant within the US vs. that in China) is ideal. Not factoring inflation within your calculations will likely result in one country spending a lot of time referring candidates. Since currency rates fluctuate on a minute by minute basis, some companies elect to compensate referrals via reward points. These points can purchase gift cards and other prizes, and may be another way to simplify the program.
Going from one place to another
Once a suitable reward structure is agreed up, you now have to look at when your employee from the UK refers an employee to someone in the US. Which business entity is going to pay for it? You have to decide if it’s the location where the referral is being made or the location making the hire will foot the bill. Another problem in deciding who will pay, are the taxes implications that differ in each country. Factoring in your corporate structure (e.g. is each country a subsidiary, or have their own incorporation?) and things can get a little tricky. Based on analyzing well over 1,200 organizations’ employee referral program, there are several ways companies have worked on this:
- The most common solution is for the business that makes the hire; pay the employee in a different.
- Next common solution is having the business where the employee resides pay the reward amount as if it’s their hire. The business won’t compensate for the difference in currencies (e.g. the bounty for hiring a Software Engineer in the US is $1,000 whilst in China it’s 2,000 Yuan.)
- The least common solution, though it does exist, is not incentivizing cross country referrals. We see this case happen when companies have multiple independent corporations that have their own P&L. Employees become less motivated once they realize there is no extrinsic motivation in helping the company hire. We recommend not to elect this route simply because technology is allowing us to report into different organizations from remote locations. This grey line may mislead an employee, and therefore not participate in such program.
When you have a multi-national organization, trying to get everyone to buy in to an employee referral program can be difficult. If you are trying to implement a one size fits all employee referral program you may have some locations fight participation. They may claim their location are already getting a high number of referrals and won’t want to increase cost with little increase. Furthermore, recruiting in some countries may not find it normal to incentivize an employee for referrals, as it may be a part of the local culture. The solution to this is communication and transparency, but while building the employee referral program you need to understand and consider each location.
Be careful not to exclude anyone
When creating a one size fits all global employee referral program, you need to choose words carefully, especially when deploying a global employment brand strategy to complement your program. The meaning of something in one culture can mean something completely different somewhere else. Some might find it an insult that referral rewards may not be considered with their family members, especially in areas such as distribution and transportation industries, even though some organizations may create this an unwritten rule.
Hopefully this post can aid you in building a global referral program with the proper structure and engagement techniques in place. Feel free to contact us as we are always happy to provide you with insights in how world class companies have designed their programs. Is there anything we missed? Any comments? We would love to hear what you have to think by submitting in the comment box below.