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What is an Employee Referral Bonus?
Employees who recommend qualified candidates to a company are given a financial incentive known as an employee referral bonus (ERB).
The bonus is typically paid after the new employee has worked for a certain amount of time and is calculated as a percentage of their starting pay.
ERBs can be an effective recruiting tool by incentivizing staff to recommend capable candidates.
Employee referral bonuses are available in various forms.
- The cash Bonus
- Gift Certificates or Cards
- Time Off
- Job Enhancement
- Bonuses for Reaching Referral Goals
- Other Benefits
Are Employee Referral Bonuses Taxable?
In general, the short answer is “yes.” Social security, Medicare, local, and federal income taxes, as well as referral bonuses, may be applicable. However, it depends on how much the referrers make and whether they work for a company.
Employee referral bonuses are regarded as supplemental wages by the Internal Revenue Service (IRS), according to the Employer’s Tax Guide:
“Wage payments to an employee that aren’t regular pay are known as supplemental wages. Bonuses, commission pay, overtime pay, severance pay, payments for accrued sick time, awards, prizes, back pay, reported tips, retroactive pay increases, and compensation for nondeductible moving expenses are just a few examples.
How Much is an Employee Referral Bonus?
Bonuses for employee referrals can range from $1,000 to $10,000.
The time it takes to fill a position can be reduced by 40% with employee referrals.
Tens of thousands of dollars can be spent just to fill a vacant position.
The quicker time to fill will be worthwhile if your employee referral bonus is between $1,000 and $5,000.
Employee recommendations are known to save over $7,500 per hire. They assist in putting the best candidates in your recruitment pipeline and ultimately save you money.
Also, See: Employee Assistance Programs (EAP)
