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Performance Management Performance Management Cycle

Using Referral Bonuses

Referral Bonus

A referral bonus is an award given to an employee who helps the agency recruit new talent by referring someone for an advertised, hard-to-fill vacancy (i.e. after the vacancy has been announced for open competition through proper channels).  A referral bonus may be paid after that person is hired by the agency and performs successfully in the job.

May an agency grant a referral bonus under the incentive awards authority?

Yes, agencies may use the incentive awards authority to provide incentives or recognition to employees who bring new talent into the agency by helping to recruit for hard-to-fill positions.  Agencies may want to establish a separate award specifically designed for this purpose.  Such an award normally would be called a referral bonus.

The difference between a recruitment incentive and a referral bonus

Besides their purpose and authority, the primary difference between these two types of payment is who receives it.

In the case of a recruitment incentive, the person who actually accepts the job gets the payment.  Agencies may pay a recruitment incentive if the agency determines the position is likely to be difficult to fill.  A recruitment incentive may be paid to an employee who is new to the Federal Government, a former Federal employee with at least a 90-day break in service, or a former Federal employee with a less than 90-day break in service in certain cases (see definition of Newly appointed in 5 CFR 575.102).  In return, an employee accepting a recruitment incentive must sign a service agreement with the employing agency.  The authority to pay recruitment incentives is in 5 U.S.C. 5753 and 5 CFR 575, subpart A.

In the case of a referral bonus, the person who refers a job applicant(s) for already openly advertised vacant positions gets the payment.  Specific requirements that must be met to receive the bonus are found in the agency's awards program.  Agencies may grant referral bonuses under the general authority of the Governmentwide awards program (5 U.S.C. chapter 45 and 5 CFR part 451).

Restriction and use of referral bonuses only to those newly hired into Government service

The awards program in general is not restrictive in nature, with agencies free to design and implement their awards to meet their needs.  Additionally, this could provide a further distinction between referral bonuses and recruitment bonuses, which are restricted to new Government hires.  Finally, agencies may want/need the ability to recognize employee efforts in getting transferees to fill their vacancies.

Using referral bonuses

Referral bonuses, used judiciously, may help agencies tap additional resources in their efforts to recruit new talent.  Recruitment in tight labor markets can be particularly challenging.  To meet this challenge, agencies are exploring the use of practices that have proved successful in private industry.  While the Federal Government generally has more limited funding available for these efforts than the private sector and has more restrictions and rules regarding allowable hiring practices, the awards authority can provide incentives or recognition for those employees who facilitate the agency's hiring initiatives by referring potential new hires to the agency.

Each agency must determine whether the use of referral bonuses is appropriate to meet its needs.  They might prove helpful when the agency is having difficulty recruiting candidates for hard-to-fill positions in shortage categories.  These bonuses would only be appropriate for employees whose regular job is not recruitment, but who nevertheless devote significant personal effort to promoting the benefits of employment with their agency and refer potential new employees to their human resources office for openly publicized vacancies.

Referral bonuses do not violate the prohibition in title 18 of the U.S. Code against receiving anything of value for helping a person get a Government job by referring his or her name

The prohibitions contained in 18 U.S.C. 211 do not bar agencies from providing referral bonuses to employees who have referred potential job applicants.  An opinion from the Office of Legal Counsel, Department of Justice, states that the prohibitions in title 18 seek to prevent candidates for federal employment from having to pay influence-peddlers or employment agencies to obtain government positions.  See 13 Op. Off. Legal Counsel 277 (1989).

Legal requirements that affect referral bonuses

In establishing and operating its referral bonus program, an agency must ensure the program does not conflict with or violate any law or Governmentwide regulation (5 CFR 451.106)

Specifically, the agency is accountable for ensuring that the referral bonus program does not violate the legal requirements for broad public awareness of job openings; recruitment from appropriate sources to seek a work force drawn from all segments of society; and hiring selections based solely on relative ability, knowledge, and skills after a fair and open competition that assures equal opportunity to all candidates.  (5 U.S.C. 2301(b)(1), 2301(b)(2), 5 CFR 2.1(a), 4.2; EEOC Compliance Manual, section 15.)

Referral Bonus Eligibility

An employee who meets the agency-established criteria for such a bonus, whose official duties do not include recruitment, and who is not involved in any way in the selection of the referred individual is eligible for a referral bonus.  Also, an employee cannot refer a relative as defined at 5 U.S.C. 3110(a)(3) (that is, a father, mother, son, daughter, brother, sister, uncle, aunt, first cousin, nephew, niece, husband, wife, father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, stepfather, stepmother, stepson, stepdaughter, stepbrother, stepsister, half brother, or half sister).

Criteria for paying referral bonuses?

Each agency must establish the criteria it will use to determine whether an employee may receive a referral bonus, what form the bonus will take, and how it will be paid. Additional information is available in a separate accompanying fact sheet, Criteria for Referral Bonuses.

Reporting Referral Bonuses

Agencies using cash to grant referral bonuses report them to the Central Personnel Data File (CPDF) and/or Enterprise Human Resources Integration (EHRI)using nature of action code 848 (referral bonus).  Agencies choosing to grant time off as a referral bonus report the hours granted using the 846 nature of action code (individual time off award).

Rewarding internal recruiters in the HR office

Agencies also may want to recognize the outstanding accomplishments of Federal employees whose job it is to recruit and hire new employees.  These employees are the ones who hold or attend job fairs, visit schools and college campuses, supply supervisors with the hiring certificates, and regularly do their best to get the right person referred for the right job.  Agencies may use their regular awards processes to develop specific incentives or recognize deserving employee accomplishments either through awards based on the employee's rating of record or awards given for specific accomplishments or contributions.  These awards should be processed and reported following the agency's usual awards reporting procedures.

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