Counteroffers – Top 8 Pros and Cons
The definition of counteroffers is simple: a current employer agrees to meet or exceed the employee’s new job offer. Pay increases are the most common, but counteroffers may include a title change, additional training and development opportunities, enhanced remote work options, or additional recognition.
As more and more offices reopen their doors, we’re hearing of something that is being called the Great Resignation. Hundreds of thousands of workers, even millions of workers by some estimates, are leaving their jobs in search of more money, shorter commute times, regular work-from-home opportunities, more flexibility, and the pursuit of more happiness. Many of those people say that job burnout and lack of career growth options at their current workplace are the main drivers of this situation. Some employees report that the way they perceive that they were treated by their employers during the worst period of the pandemic is a leading cause of looking for new jobs. All types of work and all job levels are feeling the effects of this. A large number of employers report significant difficulty in filling job openings and cite low applicant rates as a serious concern.
In alignment with this growing trend of worker resignations, increasing numbers of employers are finding themselves contemplating whether or not to make counteroffers to the employees who are resigning, in what they see as an earnest effort to keep their workforces intact.
Here are eight pros and cons to consider related to counteroffers:
1. Employers make counteroffers to retain talent, an increasingly precious commodity in the new workplace world we inhabit. Some employers have been constrained from increasing wages due to tight budgets or limits imposed by a corporate headquarters (often located far away from the actual worksite) and can only go outside those budget lines in extreme cases – which a counteroffer situation generally represents.
2. In other cases, higher-level management could be unaware of the employee’s dissatisfaction with the job until the moment they receive the resignation notice. This is particularly true in satellite office situations where the management team is located at a different facility than the workers, such as retail outlets or multi-branch service companies.
3. Counteroffers don’t usually fully address the underlying reason(s) the employee looked for another job in the first place. They can also create a bad precedent, create salary inequalities, and harm morale. According to one recent survey, nearly 60% of the employees who accept a counteroffer end up leaving their employer within two years anyway. Remember that the employee has already resigned, and they have made up their mind to do something different. Once that employee’s immediate colleagues learn of the counteroffer, they may well feel that they too can get a nice pay raise by following the same strategy.
4. Remember that the only person who can truly determine the best outcome for their career, family, and bank account is the employee. While it is reasonable to bring up the benefits of staying to the employee such as forfeiture of seniority, benefits waiting periods, potential loss of higher annual paid time off accrual, and the challenges of “reinventing oneself” in a new work environment, it is likely the employee has already taken these considerations into account before making the decision. Instead, employers should focus their attention on the remaining workforce, and identify anyone who might be ready for a promotion to fill the shoes of the person who is leaving.
5. In some cases, the employee involved may genuinely like their current job or team of coworkers but decided that they needed to take strong action in order to nudge management into increasing the compensation package. However, more often than not, the underlying reasons which led them to seek out a new job in the first place will not have changed. The additional pay makes it easier to accept this for a time, but in cases where the boss is unreasonable, or the commute is ghastly, or the coworker in the next cube has an annoying laugh, it will not be long before the extra money does not have the same impact that it did when it was first received.
6. Oftentimes a job offer from a new employer is seen as having considerable potential for career growth; that is part of why it was attractive. It is important to recognize that submitting a resignation can have a real impact on a person’s growth opportunities with the old employer. When an employee has turned in their letter of resignation and then turns around and accepts a counteroffer to stay, there’s generally an unspoken yet lingering question of their true loyalty. Sometimes there is an implicit level of extortion: “I will continue working here but it will cost you significantly more in wages than it did last month.” Even if the old job does have opportunities for professional growth, the employer may not see that employee in the same light after a counteroffer and could pass them by with future opportunities.
7. In some cases, a counteroffer can be an insincere stall-tactic by the employer, to give them time to go out and start looking for a replacement. They make the counteroffer, sometimes a very generous one, while at the same time looking behind-the-scenes for someone else who will do the same job – usually for less money. Some weeks or months later, the employee finds themselves out of the old job and without a new job to go to.
8. Lastly, counteroffer or not, when an employee resigns in good faith, it is best to not burn any bridges. Leave the door open for future collaborations and cooperation. It is always possible that you will need some bit of arcane tribal knowledge some months down the road, a question that the former employee can answer in a 90-second phone call.
Last month’s HR Bulletin addressed the concept of Stay Interviews. A “stay interview” is a proactive approach that will help you to take the pulse of each and every employee long before they place a resignation letter on your desk. Instead of having to decide whether or not to make a counteroffer, you’re better off being proactive. Ask employees questions like: How can I help you succeed in this organization? What are the things you need to help you fast-track your career goals? These can be a very useful tool for assessing the workforce’s overall job satisfaction as well as individual employees’ job satisfaction.
If you or any of your team have any questions about any of the information presented here, please contact HR Service Inc. at (801) 685-8400. We’d be happy to help!
Prepared by David Norton, SPHR, SHRM-SCP,
Human Resources Business Partner