In the Information Technology Enabled Services (ITES) and Business Process Outsourcing (BPO) industries, among others with a high turnover rate i.e. where people change jobs quite frequently, employees are encouraged to refer suitable candidates for any vacancies that may arise in the companies that they work for and given cash incentives if any such candidates are selected.
The benefits for the employers are two-fold. Firstly, they save on recruitment expenses, since the incentive given is often far less than the fee that may have to be paid to a placement agency (or recruitment consultancy, which is the more commonly used nomenclature in India) or the cost of advertising online or through the print-media and then short-listing resumes. Secondly, since employees generally refer their friends or relatives, the scheme helps in retention of talent.
However, some unscrupulous placement agencies and employees have found a loop-hole that they can exploit to their advantage. Such agencies pay cash bribes to employees of the companies that they wish to place candidates with, in order to get them to submit resumes of their clients through the referral schemes. If any of the candidates then gets appointed, he or she pays an amount equivalent to one month's salary to the agency.
A lawyer would be more competent to comment on the laws that their actions are in contravention of, but these definitely amount to breach of the employment contracts. Companies are well within their rights to take disciplinary action against the erring employees and to black-list the placement agencies.