Agencies Can Use Referral Bonuses To Support Recruitment and Hiring

Here is good news for Federal agencies trying to cope with a tight labor market! Agencies can use the incentive awards authority (chapter 451 of title 5, Code of Federal Regulations) to establish a referral bonus program that provides incentives to employees who bring new talent into the agency. Using these bonuses judiciously can help agencies tap additional resources in their efforts to recruit new talent using this successful private sector method.

The difference between a referral bonus and a recruitment bonus

The main difference between these two types of payments is who receives it. In the case of a recruitment bonus, the person who actually accepts the job gets the bonus. Agencies may pay recruitment bonuses to individuals who are newly appointed to the Federal Government and are selected for hard-to-fill positions. The law specifically authorizing recruitment bonuses is in section 5753 of title 5, United States Code. In contrast, a referral bonus goes to the person who refers a job applicant who is selected and successfully employed. The law under which agencies grant referral bonuses is the general incentive awards authority in section 4503 of title 5, United States Code.

Criteria for referral bonuses

Each agency must determine whether using referral bonuses is appropriate. These bonuses might be suitable for employees whose regular job duties do not include recruitment, but who promote employment with their agency and refer potential new employees to their human resources offices. Each agency must establish the criteria it will use to determine when an employee would receive a referral bonus. Possible agency criteria might address the following issues:

• Eligibility for a referral bonus (for example, referral bonuses are payable to employees whose regular job does not include recruitment);
• Employment conditions for the new hire (for example, the new employee must stay employed for a minimum period of time, and perform acceptably);
• The size of a bonus (for example, the incentive might be a small percentage of the costs saved by avoiding certain recruiting expenses, or an appropriate amount to reflect the effort put forth by the employee to refer someone); and
• The timing of bonus payment (for example, one-fourth of the referral bonus is payable when the agency hires the new employee and the remainder upon completion of the new employee's first 3 or 6 months of employment).

Recognizing official recruiters

Agencies also may want to recognize the outstanding accomplishments of their employees whose job is to recruit and hire new employees. These employees officially hold or attend job fairs, visit schools and college campuses, supply supervisors with hiring certificates, and regularly do their best to get the right person referred for the right job. Generally, these employees would be ineligible for referral bonuses. Agencies should use their regular awards processes to develop specific incentives or recognize these employee accomplishments either through awards based on the employee's rating of record or awards given for specific accomplishments or contributions. Agencies should process and report these awards following their usual reporting procedures.

Report referral bonuses

Agencies process referral bonuses as cash awards and report them to OPM's Central Personnel Data File using a new nature of action code 848. Also, agencies can choose to grant time-off awards as referral bonuses. If so, the agency reports these bonuses using the 846 nature of action code (individual time-off award).