What Do Referral Bonuses Do?

Abstract: In a 13-month RCT covering all grocery store jobs at a European grocery chain, 238 stores were randomized to pay different levels of bonus for employees to make referrals; the bonus amount reached up to 40% of monthly take-home salaries. Larger bonuses provide a statistically significant, but economically small boost to the number of referrals made. Despite this, the referral bonus programs are highly profitable for the firm, as referred workers are substantially more likely to stay and also boost other workers' retention. Consistent with the profitability of the bonuses, after the RCT, the firm rolled out a referral program across the entire firm and increased bonuses. In the post-RCT roll out, referral rates remain low for grocery jobs, but are high for non-grocery jobs, which havea much better reputation than grocery jobs. Surveys support that referrals remain low for grocery jobs despite significant bonuses because of the reputation of grocery jobs as undesirable.