The Dark Side of Employee Referral Bonus Programs: Potential Applicants’ Awareness of a Referral Bonus and Perceptions of Organisational Attractiveness

Abstract

The purpose of this study is to examine the effects of potential applicants’ awareness of employees being rewarded for referrals on organisational attractiveness, based on credibility theory and the multiple inference model. In a first study ( N = 450), final‐year students were less attracted to the organisation when they knew employee referrals were rewarded, which was partially explained by lower credibility perceptions. Moreover, varying the specific characteristics of the referral bonus program (i.e. timing, size, type, recipient) did not improve potential applicants’ perceptions of credibility and attractiveness. A second study ( N = 127) replicated the negative effect of referral bonuses on organisational attractiveness and found that it could be explained by both potential applicants’ inferences about the referrer's other‐oriented motive and lower referrer credibility. Whether employees explicitly stated that their referral reason was bonus‐driven or not did not affect these results.