What is the cost of a counter-offer?

In recent times it has become even more challenging to recruit experienced and high calibre staff. When a company has a top performer in their midst, they will do everything in their power to keep hold of them, although occasionally certain efforts may come a little too late!

Whilst we would advise any company to ensure that they adopt a management structure, culture and reward package that keeps as many people as possible happy in their role, it is almost certain that at some point in time, someone will hand in their notice.

This is where a counter-offer could come in.

What is a counter-offer?

A “counter-offer”, in recruitment terms, is where an employer offers an employee an increased salary/package in response to a new offer they have received from a prospective employer.

The new terms may not be limited to basic salary alone; it could include better hours, bonuses, flexibility or even an entire promotion or new job role.

When could a counter-offer occur?

A counter-offer will usually be made after an employee submits their letter of resignation.

However, it might also happen following an open and honest conversation about how satisfied someone may be feeling in their role, especially that they are looking at new roles and employers. It could certainly save a lot of time and unrest if the offers were made before someone had already made a decision to resign and accept something else.

How to make a counter-offer

If you are a manager hoping to retain a member of staff, it is important to identify the employee’s real reasons for leaving.

It may be that they are moving on because what they truly want from their career will never be entirely met by the role or your company for whatever reason, no matter if an increase in salary is offered. It is not always about money, and you should take care and have an open and honest conversation first, really listening to what they have to say.

However, if their reasons for leaving are simply due to practical things like money, hours, and responsibilities, take some time to investigate how changing these for one person will impact on the wider team and business, before making a counter-offer.

If it can be done in such a way that is harmonious, fair and in keeping with a wider strategy then put a new set of terms together in writing and organise a meeting to discuss your proposal with the employee.

It is important to treat this as if you were creating a brand-new offer for a new employee. Keep an open mind as to whether this will be accepted or rejected.  If someone has felt strongly enough to look elsewhere, they may need a little convincing that they will not feel the same way in the near future.

What is the cost of a counter-offer?

Let’s look at this from the point of view of a company that is in the position of potentially losing someone and considering making a counter-offer.

Initially, you may be shocked and saddened to learn that your employee is looking to move on, and your immediate thought maybe how to stop them from leaving. There is evidence to suggest that rejection can act as a magnetic force and employment is no exception to this rule.  In the heat of the moment, it is easy to panic at the loss of your high performer and instantly seeks to retain.

Should you attempt to keep them on board by increasing their salary and terms naturally this will come at a cost to the business.  What’s more, you will need to consider other staff members who are working in a similar role to ensure that they are rewarded equally. If there are multiples, this move could add a significant sum to your bottom line.

Another consideration of cost is how this will affect the culture of your company.  It is rare that these situations remain completely sacred from the rest of the team, so you must consider the impact of your decision to fight to keep the person to those around them.

There is also the matter of trust which is hard to quantify. If someone has gone through the upheaval of applying for other positions, attending interviews and then making the significant decision of accepting another job, there must have been some fairly compelling reasons to do this.

For many, going about these activities and keeping it from their boss puts them in a very difficult and uncomfortable position and therefore it was not a decision made lightly.  To try to tempt them out of it may not necessarily be fair on them or you.

The other factor here is how the employee will feel upon receiving a counter-offer. They may question why these preferable terms were not made available to them sooner.  They can feel resentful that it took going through these lengths of finding another job just to be recognised and get what they want or felt they deserved in the first place.

Statistics show (between 60-80% has been recorded) that a vast majority of people who are counter-offered go on to leave anyway after 6 months. You have to ask yourself whether it is worth going to the trouble and costs attached, or should you just let them go.

No one is irreplaceable, and what seems like a crisis initially can often go on to create new and improved structures, allow other employees to shine or find new talent to bring into the business.

If you find yourself at a crossroads and want to talk through your options, get in touch with the team at Vanilla Recruitment. We are always on hand to give advice and support you through to the next phase.

Other pages of interest

For more useful information, news and resources feel free to look around our website and in particular our Client and Candidate pages including Client Journey, Candidate Journey, Training Courses, Case Studies, Client Resources, Candidate Resources and our regularly updated Blog.

We recruit throughout the East Midlands covering Leicestershire, Northamptonshire, Rutland and the surrounding areas, especially Market Harborough, Lutterworth, Leicester, Corby and Kettering. We help people find their perfect job and match suitable job seekers with businesses looking to hire the best candidates across our five specialisms – SalesMarketingAccountancy & FinanceHR and Office.