Do Employee Referral Programs Limit Workplace Diversity?
Employee referrals can be useful hiring tools.
A current employee may know someone with the right skills for an open role, and research suggests referrals can provide employers with information about a candidate’s likely performance and persistence that may not be apparent from observable applicant characteristics alone. (Pallais & Sands, 2016) (Chicago Journals)
But employee referrals also raise an important question for workplace diversity: If job opportunities travel primarily through employees’ existing networks, who might never hear about them?
Research suggests that labor markets relying heavily on referrals can create advantages for workers who are already connected to employed people while putting job seekers with few or no such connections at a disadvantage. That does not mean employee referral programs are inherently harmful or discriminatory. It means employers should consider referrals as one recruiting channel within a broader sourcing strategy. (Bolte et al., 2026)
For employers trying to reach a broader talent pool, the goal does not have to be eliminating referrals.
It can simply mean making sure knowing someone inside the company is not the only reliable way qualified candidates find an opportunity.
Note: This article provides general information about recruiting and workplace diversity and is not legal advice.
What to Know About Employee Referrals and Diversity
Research on employee referrals presents a more complicated picture than simply saying referrals are good or bad.
Referrals can provide employers with useful information about candidates that may not be visible during the initial application process.
Social and professional networks can influence who employees think to refer.
Models of referral-heavy labor markets show that workers with few connections to employed people can be disadvantaged.
Referral recruiting does not automatically reduce representation; research from two firms found that network recruitment increased women’s representation overall, although the effect was weaker at higher organizational levels.
Employers can combine referrals with broader sourcing methods rather than depending heavily on a single source of candidates. (Bolte et al., 2026; Fernandez & Rubineau, 2019; Hederos et al., 2025; Pallais & Sands, 2016)
What Is an Employee Referral Program?
An employee referral program allows current employees to recommend people they know for open positions.
There are legitimate reasons employers use referrals.
In three field experiments conducted in an online labor market, researchers Amanda Pallais and Emily Glassberg Sands found that referrals contained information about worker performance and persistence that was not captured by observable worker characteristics alone. Referred workers also performed particularly well when working directly with the person who referred them. (Pallais & Sands, 2016)
In other words, referrals can provide useful information.
The diversity question begins somewhere else: Who has access to the networks through which those referrals happen?
Why Can Employee Referrals Affect Workplace Diversity?
Employee referrals depend on existing social and professional networks.
Those networks are not necessarily representative of the entire pool of qualified workers.
One concept researchers use to understand this is homophily: the tendency for social connections to form among people who share certain characteristics or experiences.
A 2025 peer-reviewed field study at a Swedish business school asked 453 participants to refer another student for a real job. Researchers found that 71% of female participants referred a woman, while 75% of male participants referred a man. They also found that the gender composition of close friendship networks appeared to be an important driver of the pattern. (Hederos et al., 2025)
Those percentages should not be generalized to every employer or workforce. The study examined one specific population in one setting.
What it does demonstrate is a mechanism relevant to referral recruiting: Who people know can influence who they think to refer.
That becomes particularly important when referrals make up a large share of an employer’s candidate pipeline.
Can Heavy Reliance on Referrals Narrow Access to Jobs?
Research suggests that it can.
A 2026 study published in the Journal of Labor Economics modeled labor markets that rely heavily on referrals.
The researchers found that referrals can generate more hiring opportunities, better worker-employer matches and higher productivity. At the same time, job seekers with few or no connections to people who are already employed can be disadvantaged, contributing to greater inequality. (Bolte et al., 2026) (Chicago Journals)
This distinction matters.
The diversity implications of recruiting do not begin only when a recruiter evaluates a résumé or conducts an interview.
Access can be shaped earlier:
Who heard about the opening?
Who knew somebody inside the organization?
Who entered the applicant pool at all?
A qualified candidate cannot compete for an opportunity they never encounter.
That is why examining sourcing channels can be part of examining workplace diversity.
Do Employee Referral Programs Always Reduce Diversity?
No.
The research does not support such a broad conclusion.
Fernandez and Rubineau examined administrative data from two companies to study whether network recruitment contributed to a glass ceiling for women.
They found that referral recruitment had a less positive effect on women’s representation at higher organizational levels, consistent with concerns about gender-homogeneous networks at senior levels.
But across the two organizations overall, network recruitment was actually a desegregating force: it increased women’s representation, although the positive effect was smaller higher in the organizational hierarchy. (Fernandez & Rubineau, 2019)
That counterpoint is important.
Employee networks can sometimes reproduce existing patterns.
They can also connect people with opportunities and improve representation in particular settings.
The outcome depends on the organization, its workforce, the networks employees draw from, the roles being filled and how referrals fit into the broader recruiting process.
A more useful question for employers is therefore not: Should we stop employee referrals?
It is: How dependent are we on referrals, and who are we reaching outside those networks?
What Does the EEOC Say About Word-of-Mouth Recruiting?
The U.S. Equal Employment Opportunity Commission does not say employers must stop using word-of-mouth recruiting or employee referrals.
Its current guidance does say that employers cannot recruit in a way that discriminates based on protected characteristics.
As one example, the EEOC explains that an employer relying on word-of-mouth recruiting from a mostly Hispanic workforce may violate the law if that practice results in almost all new hires also being Hispanic. The agency separately states that an employer, employment agency or union cannot take protected characteristics such as race, color, religion, sex, national origin, age, disability or genetic information into account when making job-referral decisions. (U.S. Equal Employment Opportunity Commission [EEOC], n.d.)
That does not mean employee referral programs are automatically discriminatory when employees refer people similar to themselves.
Rather, the EEOC guidance illustrates why the way an employer recruits—and the results of those recruiting practices—can matter under employment law.
Employers with questions about how these rules apply to a particular recruiting program should consult qualified employment counsel.
How Can Employers Use Referrals Without Depending on the Same Networks?
Employers do not necessarily have to choose between accepting employee referrals and recruiting more broadly.
The two approaches can work together.
Treat Referrals as One Sourcing Channel
A referral can bring a strong candidate into the pipeline.
But if most candidates arrive through current employees’ personal and professional networks, additional recruiting channels can help make openings visible to people outside those networks.
That can include professional associations, universities, community organizations, industry groups and job platforms that reach different candidate populations.
For Diversity.com, this is where a broader recruiting platform serves a practical purpose.
A referral can help an employer reach someone connected to its existing workforce. A public job posting can also reach a qualified person who has no connection to that workforce at all.
Those approaches are complementary rather than mutually exclusive.
Keep Evaluation Separate From the Referral
Knowing an employee can explain how someone entered the applicant pool.
It should not determine whether that person is qualified for the job.
The EEOC states that employers cannot make hiring decisions based on protected characteristics or stereotypes about applicants. (EEOC, n.d.)
Employers can instead assess referred and non-referred applicants according to the legitimate qualifications required for the position.
Look at Where Candidates Are Coming From
Employers can also examine whether their recruiting pipeline depends heavily on one sourcing method.
That does not require assuming referrals are causing a problem.
It simply answers an important question: Are qualified candidates reaching us from outside the networks our employees already have?
If very few are, broadening the places where opportunities are advertised may expose the organization to talent that existing networks do not reach.
Why This Matters for Workplace Diversity
Workplace diversity discussions often focus on what happens during selection:
Who receives an interview?
How are candidates evaluated?
Who ultimately receives the offer?
But access to employment begins before any of those decisions happen.
Someone first has to know the opportunity exists.
Referral programs demonstrate why sourcing is part of the diversity conversation.
Employees can introduce organizations to excellent candidates. The evidence does not justify treating employee referrals as inherently harmful to diversity.
At the same time, an employer’s existing network cannot be expected to represent every qualified worker who might be interested in its opportunities.
Inclusive recruiting can therefore include both.
Employers can accept strong employee referrals while also making positions visible to candidates beyond their existing networks.
The objective is not to lower hiring standards or guarantee particular demographic outcomes.
It is to make sure an inside connection is not the only meaningful path by which a qualified person discovers an opportunity.
For employers trying to build a broader talent pipeline, that distinction matters.
Final Thoughts
Employee referrals are not inherently good or bad for workplace diversity.
They are one pathway through which people learn about and gain access to job opportunities.
Research helps explain why employers value referrals: they can contain useful information about candidates and help create productive employment matches.
Research also explains why dependence on referrals deserves attention. Access to employed people is not evenly distributed, and the social networks employees draw from do not necessarily represent everyone qualified for an opportunity.
The answer does not have to be eliminating referrals.
It can be opening more doors alongside them.
For employers, that means allowing good referrals into the candidate pipeline while also making opportunities visible beyond the networks the organization already has.
Because a qualified candidate should not have to know someone inside a company simply to know that an opportunity exists.
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Frequently Asked Questions
Do employee referral programs limit workplace diversity?
Not necessarily.
Research shows that referrals can provide useful information about workers, while models of referral-heavy labor markets show that people with fewer connections to employed workers can be disadvantaged.
Other research has found that referral recruiting can increase representation in particular organizational settings. The effect therefore depends on the network, workforce and recruiting system involved. (Bolte et al., 2026; Fernandez & Rubineau, 2019; Pallais & Sands, 2016) (Chicago Journals)
Why might employees refer people similar to themselves?
Employee referrals draw on existing social and professional networks.
Research has documented homophily in referral behavior. In one field study involving university students, both women and men predominantly referred candidates of their own gender, with friendship-network composition helping explain the pattern. (Hederos et al., 2025) (ScienceDirect)
Are employee referral programs discriminatory?
Employee referral programs are not inherently discriminatory.
The EEOC does, however, prohibit discriminatory recruiting and job-referral decisions and provides an example in which heavy reliance on word-of-mouth recruiting from a largely homogeneous workforce may violate the law depending on the resulting hiring pattern. (EEOC, n.d.) (EEOC)
Should employers stop using employee referrals?
The sources reviewed for this article do not support eliminating referrals altogether.
Research shows that referrals can provide employers with useful information and can generate additional employment opportunities and better matches. A broader sourcing strategy can allow employers to retain those benefits while also reaching candidates outside their current employees’ networks. (Bolte et al., 2026; Pallais & Sands, 2016) (Chicago Journals)
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Sources & References
Bolte, L., Immorlica, N., & Jackson, M. O. (2026). The role of referrals in immobility, inequality, and inefficiency in labor markets. Journal of Labor Economics, 44(2), 447–479. https://doi.org/10.1086/733048
Fernandez, R. M., & Rubineau, B. (2019). Network recruitment and the glass ceiling: Evidence from two firms. RSF: The Russell Sage Foundation Journal of the Social Sciences, 5(3), 88–102. https://doi.org/10.7758/RSF.2019.5.3.05
Hederos, K., Sandberg, A., Kvissberg, L., & Polano, E. (2025). Gender homophily in job referrals: Evidence from a field study among university students. Labour Economics, 92, 102662. https://doi.org/10.1016/j.labeco.2024.102662
Pallais, A., & Sands, E. G. (2016). Why the referential treatment? Evidence from field experiments on referrals. Journal of Political Economy, 124(6), 1793–1828. https://doi.org/10.1086/688850
U.S. Equal Employment Opportunity Commission. (n.d.). Prohibited employment policies/practices. Retrieved September 22, 2026, from https://www.eeoc.gov/prohibited-employment-policiespractices
