Counteroffers have long been a tool in the employer’s toolkit for retaining talent. When a valued employee submits their resignation, the knee-jerk reaction is often to counter with a salary increase, more time off, or promises of future growth. While this approach can seem like an effective short-term solution, it’s essential to weigh the long-term implications for both the employee and the organization.
At Pivotal, we’ve seen firsthand how counteroffers play out, and we’re here to provide insights into whether this strategy truly serves your organization’s best interests or your own as an employee.
Why Counteroffers Happen
Counteroffers arise because losing top talent is costly and disruptive. According to the Society for Human Resource Management (SHRM), replacing an employee can cost a company 6 to 9 months of the employee’s salary. This includes expenses such as advertising the position, interviewing, background checks, and onboarding.” (Source: Workable) Recruiting, onboarding, and training new hires require significant time and resources. In contrast, retaining an existing employee can seem like a simpler, more cost-effective choice. Additionally, keeping a known, experienced team member maintains continuity and avoids unsettling the rest of the team.
However, it’s important to recognize the emotional and psychological factors at play for employees. The decision to resign is rarely made lightly, and by the time an employee puts in their notice, they’ve likely considered it for weeks or months. For them, a counteroffer may temporarily soothe doubts, though unlikely to resolve the underlying reasons for their dissatisfaction. According to a survey by the National Employment Association, nearly 80% of employees who accept a counteroffer leave or are let go within a year. (Source: Protis Global) Familiarity often feels safer than the unknown, although that safety can come at a cost—to both the employee and the employer.
Pros and Cons of Counteroffers for Employers
Pros | Cons |
Cost Savings: Retaining an employee often costs less than recruiting and training a replacement. | Eroded Trust: Research indicates that accepting a counteroffer may not resolve underlying issues. |
Continuity: The employee already knows the company’s processes, culture, and team dynamics, reducing disruption and maintaining workflow efficiency. | Cultural Impact: Other employees may perceive counteroffers as a tactic to gain raises, potentially creating resentment or encouraging others to threaten resignation. |
Quick Fix: A counteroffer buys time to address underlying issues, ensuring critical projects aren’t stalled by the departure of key personnel. | Pay Equity Issues: Offering a significant increase to one employee can upset the internal pay balance and create tensions within the team. |
Pros and Cons of Counteroffers for Employees
Pros | Cons |
Immediate Financial Gain: Often, counteroffers come with a significant salary increase or improved benefits. | Eroded Trust: Accepting a counteroffer can make employees seem disloyal, potentially straining relationships with management. This may lead to a tenser work environment. |
Reduced Risk: Staying in a familiar environment eliminates the uncertainties of starting over elsewhere. | Temporary Fix: The underlying reasons for wanting to leave, such as poor management practices or lack of recognition, often remain unresolved. |
Potential for Change: Employers may address some issues that prompted resignation, such as work-life balance or growth opportunities. | Career Stagnation: Staying could mean missing out on opportunities for advancement or development at a new company. |
How Employers and Employees Can Navigate Counteroffers
- Proactive Retention: Build a workplace where employees feel valued with competitive pay and career development opportunities. See our article, “Exodus: Are Your Employees Just Waiting for Their Chance to Jump Ship?” for ways to be proactive.
- Understand the “Why”: Address root causes of dissatisfaction before it escalates. Employees need to reach out to management before problems get too big.
- Work with Experts: Partnering with a recruiting firm like Pivotal ensures you have a steady talent pipeline to reduce dependence on counteroffers.
In conclusion, while counteroffers may seem like a convenient solution to retain talent or address concerns, they rarely resolve the root causes of dissatisfaction. For employers, the focus should be on proactive strategies such as offering competitive pay, providing growth opportunities, and fostering an engaging work culture to prevent turnover before it begins. For employees, open communication with management and a clear understanding of your long-term career goals are key to making informed decisions. If it took your resignation for your employer to address your concerns, meaningful change may be unlikely. Be cautious not to let emotions drive your decision, and consider whether a counteroffer truly aligns with your needs and aspirations. Ultimately, a thoughtful, proactive approach from both sides leads to better outcomes and stronger professional relationships.