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. It is certain at some point in time that someone will hand in their notice.

On the flip side, perhaps you are about to submit your letter of resignation and is wondering what the reaction might be.

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

It can come totally out of the blue or be expected but either way it can be very unsettling when you are all geared up to say your goodbyes and set off for new horizons!

The term, counter offer could also refer to a potential employee responding to a job offer with a request of additional salary or benefits.

They may be seriously considering joining the company but feel that the package on the table is not quite enough for them to accept in the first instance.


When would a counter offer occur? 


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

It could also happen following an open and honest conversation about how satisfied someone may be feeling in their role and giving indication 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 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.

Rather than diving in offering an increase in salary, it may be that they are moving on because what they truly want in life or their values will never be entirely met by the role or your company for whatever reason.

It is not always about more money and you should take care and have an open and honest conversation first and really listen to what they say.

If it is simply due to practical things like money, hours, responsibilities perhaps go away and investigate how changing these for one person will impact on the wider team and business.

If it can be done in such a way that is harmonious, fair and in keeping with 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 who 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 may be 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 seek to retain.

Should you attempt to keep them onboard 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 and 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.  If they are everyone’s most favourite co-worker it is likely that they will be happy that they stayed put but if they are someone who regularly ruffles feathers it could come at the cost of someone else in your team.

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.

Yet if the person is someone who has gone through the whole process purely to receive a counter offer then perhaps you need to question whether there was any trust in the first place.

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.

I often refer to the analogy of this scenario feeling like being with the person you know you’re never going to marry – it may be difficult to accept but what is best for both parties in the long run?

Holding on and putting a plaster over the problem or accepting the reality and finding a better long term fit.

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


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