Businesses throw away millions on recruitment by not encouraging their employees to refer people they know, according to new research by Capital Consulting.

The research shows that only 18% of employees work in organisations which encourage them to recommend friends or acquaintances, despite 24% knowing someone they could refer straight away. 

Capital Consulting estimates that a company hiring 250 people per year would save £80,000 if only 10% of these came through referrals and a £250 reward was paid for each. If every company listed at the London Stock Exchange did this, the total saving would be more than £260m. 

The research found that 46% of employees have referred someone, 42% have been referred by someone else and two-thirds are happy to refer someone in the future.  

Marisa Kacary, marketing director at Capital Consulting, says: “Whether it’s due to short-sightedness or a lack of expertise, most companies seem reluctant to endure the short-term pain of setting up a scheme and are paying the price in the form of high recruitment costs and staff turnover.

“Yet referral schemes are simple to set up and operate, cost-effective and easy to promote through internal communications. With competition for talent fiercer than ever, it’s time for employers to explore this hugely under-utilised method of finding the right man or woman for the job.”