The referral penalty: Decreased perceptions of merit undermine helping behavior toward referred employees.

Abstract

Employee referrals are commonly used by organizations due to their numerous benefits. However, it remains unclear how organizational incumbents, who are uninvolved in the hiring process, perceive and react to referral beneficiaries. Although traditional views suggest that the presence of a referral signals merit, incumbents’ perceptions may differ. We theorize that incumbents are more likely to perceive referral beneficiaries as less merited than nonreferred employees due to perceived legitimacy concerns stemming from a simplified view that reliance on network contacts de facto compensates for lower qualifications. Drawing on equity theory, we then theorize that lower merit perceptions lead to less positive and more negative behaviors toward referral beneficiaries as an attempt to restore the equilibrium between beneficiaries’ perceived inputs (e.g., driven by perceived lower merit) and outputs (e.g., being on payroll). Sampling employees from industries in which referrals are normative (Study 1a) and from a cultural context that is positively predisposed toward referrals (Study 1b) confirmed our theorizing. In a subsequent study, aiming to enhance the generalizability of our findings, we found supporting evidence for perceived equity violations, leading incumbents to engage in corrective behaviors toward referral beneficiaries (Study 2). Finally, testing our hypotheses more conservatively, we found that negative attributions toward referral beneficiaries persisted even when the referred employees had demonstrated high performance, thereby underscoring the robustness of our findings (Study 3). This article elucidates important unintended consequences of one of the most widely used recruitment methods—employee referrals—and draws implications for both theory and practice. (PsycInfo Database Record (c) 2026 APA, all rights reserved)