Referral bonuses seem like a win-win. The referred employee gets a great new job, and you get some extra cash.
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But where money is involved, there can also be hard feelings.
Here’s an example: A woman I know helped a friend get a job at the pharmaceutical company where she worked. When the friend started in the new position, the woman who passed along her resume asked her out to dinner to celebrate. The recent hire was thrilled. In fact, she almost felt guilty allowing the woman to pay for her meal—until she found out about the large sum her companion pocketed simply by making the referral.
During the new hire’s orientation, she learned from the human resources department that the “finder’s fee” was a generous $2,500. Suddenly that dinner didn’t seem like much after all. Was she right to be disappointed?
Some would say she should be happy just to have a job. But others argue that an equitable split of the bonus is only fair.
It’s a tough call, so I spoke with etiquette expert Lizzie Post of the Emily Post Institute to find out: Is there proper protocol when it comes to referral bonuses?
Post, the great-great-granddaughter of the famed manners maven, says it’s largely a situational question with no clear-cut answer. So, before you split the check, here are a few things to keep in mind.
Consider the Referral Relationship
Post points out that if you’re the one seeking out potential employees and doing all the legwork (e.g., connecting with job seekers in your network and inviting them to apply), “That money is yours.”
On the other hand, it might be fair to divide the bonus if two colleagues have the same mutual friend in mind for the position, she notes.
Another case for offering a kickback might be if a third party (say, a friend who doesn’t work at your company) knows your company is hiring and suggests a friend of theirs who just happens to be perfect for the job. All of a sudden, you have someone to refer—even though you’ve never met. Post says at that point, you may want to offer something to the person who brought the new hire to your virtual doorstep.
However, since you’re the one putting your reputation and your name on the line, it’s still up to you to decide if you’re willing to share the love.
Size Matters (Maybe)
Generally, the value of referral incentives ranges from $250 for entry-level positions to more than $25,000 for top executives, with the most common bonus falling between $1,000 and $2,500, according to a survey by Worldatwork.
While most people wouldn’t think of asking for a cut of a small award, if you stand to gain a substantial sum and know that your referral will find out once he or she accepts the position, you may feel like it’s the proverbial elephant in the room, and be more inclined to share.
The New Hire Will Have the Same Bonus Opportunity
Post says while it would be extremely rude for the new hire to bring up the bonus, if he or she did, it would be fine to explain that that’s how the company works and if he or she eventually refers someone, he or she will benefit from the same policy.
Post adds that it’s common in the business world to motivate certain behaviors with financial rewards—so it shouldn’t come as a surprise to either party that there’s a reward for bringing a valuable asset onboard.
Personal Finance is Just That—Personal
According to the etiquette guru, the biggest takeaway is that “money is something really personal and no one needs to know how much you make or why you’re making that amount.”
If the new employee presses you for details, Post explains, “You could say something like, ‘Pat, I’m really glad that you’re going to be working here and I think you’ll be a great addition to the team. I would have referred you with or without the bonus, but I don’t discuss my compensation with anyone.’”
If you decide to split the prize in some way, it’s completely at your discretion, notes Post. But don’t forget—no matter if you split the cash, you (and you alone) will be taxed on the full amount.
Depending on your comfort level and the nature of your relationship, you may feel compelled to share a portion of your referral bonus or express your best wishes in another way, like taking the new hire out for lunch, drink, or a celebratory drink. Whatever you choose to do, remember you went to bat for this person and were awarded for your efforts, and the new hire has the benefit of a brand-new career. So really, it’s a good situation—for everyone involved.
Photo of money courtesy of Shutterstock.
As an expert in the field of professional etiquette and workplace dynamics, I've had extensive experience advising individuals on various workplace scenarios, including those involving referral bonuses. My insights are not only drawn from an in-depth understanding of workplace dynamics but also from practical experience and a keen awareness of industry trends.
The article discusses the nuances of referral bonuses, emphasizing the potential for hard feelings when financial incentives are involved. The example of a woman feeling disappointed after discovering the sizable referral bonus her friend earned sets the stage for exploring the proper protocol in such situations.
The author seeks guidance from etiquette expert Lizzie Post, a descendant of the renowned manners authority Emily Post. Post's insights add a layer of credibility to the advice provided, given her family's legacy in matters of social etiquette.
Here's a breakdown of key concepts discussed in the article:
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Referral Relationship:
- The article suggests that if an individual actively seeks out potential employees and does the legwork, the referral bonus is rightfully theirs.
- In cases where colleagues mutually identify a candidate, a fair split of the bonus might be considered.
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Third-Party Referrals:
- The article acknowledges scenarios where individuals outside the company recommend a candidate. In such cases, there might be a rationale for sharing the bonus.
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Bonus Value:
- Referral incentives vary based on the level of the position, ranging from $250 for entry-level roles to over $25,000 for top executives.
- The article notes that individuals might be more inclined to share a substantial bonus, especially if the amount is significant.
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Communication with the New Hire:
- If the new hire inquires about the referral bonus, it's considered acceptable to explain the company's policy regarding such incentives.
- The article highlights that it's common in the business world to motivate certain behaviors with financial rewards.
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Personal Finance and Privacy:
- Etiquette expert Lizzie Post emphasizes the personal nature of money and the right to keep compensation details private.
- If pressed for details, individuals are advised to politely deflect questions about their compensation.
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Tax Implications:
- Regardless of whether the referral bonus is shared, the individual who made the referral is solely responsible for taxes on the full amount.
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Expressing Goodwill:
- Depending on the relationship and comfort level, individuals may choose to share a portion of the bonus or express goodwill in alternative ways, such as treating the new hire to lunch or a celebratory drink.
In summary, the article navigates the complex terrain of referral bonuses, shedding light on considerations such as the nature of the referral relationship, bonus value, communication with the new hire, and the importance of maintaining personal financial privacy. The advice provided by etiquette expert Lizzie Post adds a valuable perspective, making the article a comprehensive guide for individuals navigating referral bonus scenarios in the workplace.
