A Referral Can Get You the Job, But Can It Get You More Money?

This blog post is an excerpt from our newest study, The Impact of Job Referrals on Employee Engagement and Workforce Diversity.

Between April 24, 2017 and August 25, 2017, PayScale asked 53,000 workers if they had received a referral. Because respondents also provided demographic information and details on their current position, we were able to study the impact referrals have on pay, engagement, which groups benefit from referrals as well as which groups are detrimentally impacted by referrals. You can download the full study here.

Research suggests that nearly 33 percent of all interviews come from a referral and that referrals significantly increase the likelihood of a job offer. But will you get a bigger paycheck too?

As it turns out, the type of referral you received can make a big difference in your salary.

Research shows that nearly 33% of interviews come from referrals. But will you get a bigger paycheck?

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Friends and Family Referrals Can Negatively Impact Your Pay

Contrary to what you might expect, friends and family referrals can have a negative impact on pay. When we control for variables such as industry, occupation, location and other factors, such referrals decrease men’s salaries by about $1,600 and have no statistically significant impact on women’s salaries. It seems that while who you know certainly impacts your chances of landing a job, a referral by someone you know only in a personal context could have a negative impact on your earnings.

Referrals from Business Contacts Can Help You Land a Higher Offer

Referrals by business contacts, on the other hand, tend to increase pay by several thousand dollars holding all else constant. But business contact referrals do not affect everyone equally. Our statistical analysis shows that a typical man can expect such a referral to lead to a $8,200 salary increase, while a typical woman should only expect a $3,700 salary increase. This is a 55 percent difference.

There is also a large pay increase for men who receive referrals from extended networks. They can expect to receive a $3,200 boost in pay, all else equal. Women, on the other hand, can expect no such windfall. Our analysis shows these referrals do not have a statistically significant impact on women’s pay.

The disparate impact of referrals on the pay of men and women is troubling. But, it also potentially helps explain some of the gender wage gap, especially since, as we show above, non-Hispanic white men receive referrals at much higher rates than women.

To learn more about which groups benefit from referrals, and how referrals impact your pay, download the study here.

Tell Us What You Think

Have you ever been hired through a referral? If so, how did it affect your pay? Tell us your story in the comments or join the conversation on Twitter.