Published: July 20, 2022 | Updated: July 21, 2022
Sarah King, Director, ViewHR, on making a counteroffer to stop an employee from leaving
In this ever-evolving recruitment environment, we are finding ourselves discussing counteroffers more and more, writes Sarah King, Director, ViewHR.
What is a counteroffer?
A counteroffer happens when an employer offers an incentive to an employee to convince them to stay in the business, after they have announced that they will be taking another job. The incentive often includes a salary raise to match, or an offer to increase, what they have been offered elsewhere. Other incentives may include additional benefits, a job title change, a change in role, a promotion, additional responsibilities, or the chance to work on an interesting project.
Why might it be used?
A valuable employee handing in their resignation is a worrying time for an employer. Research conducted by Investors in People showed that 84% of companies found attracting the right calibre of staff a challenge, and 67% of businesses reported that retention is a key business challenge . Recruitment creates a lot of work and cost, from the obvious recruitment and temporary cover costs to the more subtle costs of losing knowledge from the outgoing employee, and the time it takes to train up a new employee. It’s easy to see why offering more money to keep a good employee is a very tempting option and, in some cases, it works out well for both the employer and the employee.
However, it’s important to consider some of the potential cons of counteroffering. An employee who’s gone to the effort of updating their CV, liaising with recruiters, attending interviews, and accepting another position, may have already mentally left the business. Unless they see improvements in the areas that made them consider leaving, they may still end up leaving in the near future. In fact, data from the CEB shows that 50% of employees who accept a counteroffer leave within 12 months .
Employers also need to think about the precedent that might be set when counteroffering. If employees realise that they can get a payrise or other benefits by resigning, you’re more likely to end up with additional resignations as other employees attempt to achieve the same result.
Any payrises given will also need to be considered in relation to potential equal pay complaints. Employees are protected against victimisation that results from giving or receiving information about pay, where this is connected to a protected characteristic. So, if a male receives a counteroffer that results in him being paid more than a female colleague, he is at liberty to give her that information and she may raise a complaint under the Equality Act 2010.
Acting before it’s too late
A key to stopping counteroffers is to proactively stop employees wanting to leave. When you keep employees happy and manage issues quickly, you can stop them being interested in looking at other opportunities and lessen the potential for counteroffers. There’s several ways that an employer can achieve this, and we’ve listed some of these below.
Check your salary levels
If employees are leaving to increase their salary, it may be worth checking that your salaries are competitive. Take the time to benchmark your employees, and check whether new recruits are being paid more than existing employees. We are encouraging our clients to benchmark more frequently than before. If you are paying newcomers more, think about what your rationale is for this and how your current employees will feel if they find out about it. PWC have been looking at their pay and have announced that they are giving a 7% pay rise to the majority of staff, with 50% getting a 9% pay rise or more . They’ve stated that this is partly due to cost of living rises and partly because the labour market is tightening. They understand the difficulty in recruiting and want to keep their talent by ensuring their salaries are competitive, thus reducing their employees interest in looking at other roles.
Understand your employees
We’ve covered exit interviews and stay interviews in other blogs and these can be really useful in getting a deeper grasp of what motivates your employees and why they’re leaving the business. If a specific area keeps coming up in exit interviews, it’s likely to be on the minds of your current employees as well, so take the time to plan improvements and communicate these to your employees. For example, if five people have left as they’ve been offered more flexible working options in their new roles, could this be an area that could be improved for your existing employees? Staff surveys are another valuable way to find out more about what your employees want. The right questions can give you information on how your employees view their options for progression, whether they find their work interesting, how your benefits are viewed etc.
Plan for leavers
Some employees will leave a business, so if you don’t want to counteroffer (or if the offer gets rejected!), planning for leavers will help lessen the impact on your business. It’s worth reviewing your employment contracts to make sure that your post restrictive covenants work effectively for the business. You may also want to do a review of notice periods to make sure they properly reflect the seniority of the role. It’s surprisingly common for employers to get a nasty shock when they find out that someone who was originally employed in a junior position, and has been promoted through the business, is still on a one week or one month notice period. Succession planning will also benefit your business, as having single points of failure creates a risk when people choose to leave.
There are many areas to focus on which can reduce the need for counteroffers and will lead to a happier, more productive workforce. If you would like to discuss how ViewHR can support you in making improvements to these areas, please get in touch for an initial discussion.
Sarah King, Director of View HR Limited