Katalyst Group

Extending counteroffers is a fairly common practice in many companies, and understandably so. Whenever a long-term employee submits his resignation, the first thought that springs to the mind of the manager is that he will have to train someone new, which is why employers think to extend counteroffers first.

Let’s face it. It takes time to train new recruits and adjust to the work culture. TMost managers will try to stop the employees from leaving to evade the daunting task of finding a replacement. And more often than not, in this earnest, they end up making grave counteroffer mistakes.

The question is, does extending counteroffers actually work in your favor? Rarely.Why not consider extending counteroffers to employees who have submitted their resignations? It’s time to uncover the answers.

The Cons Of Extending Counteroffers: What You Need To Know

Before we talk about the downsides of counteroffers, let’s look at what the concept entails. When an employee submits his resignation, the employer tries to retain him by offering an increase in pay or benefits. Indeed, it’s not unheard of for employers to offer a 25% raise in salary with additional benefits as counteroffers.

Extend Counteroffers To Resigning Employees

Most employers feel that it would cost them less to offer an existing employee a higher salary than to look for a replacement who they will have to train from scratch. But is that assessment correct?

Employers don’t really realize that in order to hold onto their employees, they are actually making glaring counteroffer mistakes which can backfire quickly. Here are some of the reasons why you should think twice before extending counteroffers.

To Extend Counteroffers is a Short-Term Solution With No Long-Term Benefits

Statistics prove that extending counteroffers rarely works long-term. Sooner or later, you will lose the employee. In fact, 80% of employees who accept the offer tend to leave the organization within the next month. Surprised? If that wasn’t enough, 90% of the remaining 20% too would likely leave within a year.

So what good did this counteroffer do? You had to pay the employees more salary and offer more benefits, and ultimately, it all came down to nothing. 

The Cause Of Resignation Remains Unchanged

No one leaves a job without any reason. If someone has submitted their resignation, it’s likely because they had glaring issues in the workplace that they did not feel could be resolved. Perhaps they were unhappy with the work environment or were not satisfied with the work. It could also be that they were uncomfortable with their boss.

Whatever the case, the employee’s decision is already made. The individual spent  time and effort looking for other opportunities. And chances are that the employee’s   resignation was submitted only when there was another role waiting.

So why would theefforts go to waste and accept your counteroffer when the factors which prompted the resignation remain unchanged? 

Would you extending counteroffers really make the individual a reliable long-term member of the team? Likely not.

To Extend Counteroffers Can Be A Trigger For Other Employees

When other employees hear that one of their colleagues was offered an increment with benefits due to a resignation, won’t it create a ripple effect? They will start feeling like they are underpaid, too, and deserve more. 

By extending counteroffers, you will send the message that you are willing to meet the demands of your employees. This will trigger a cycle that will be hard to break.

As soon as word spreads about your counteroffer, many other employees will approach you for increments. And if you don’t adhere to their requests, they too will be inclined to look for other job alternatives.

Additionally, a lot of employees will be demotivated when they realize that their colleagues are being offered more. Hence, their quality of work will also suffer. So to hold onto one employee, you will lose the loyalty and performance of many others. 

Extending Counteroffers Is Seldom Cost-Effective

Contrary to popular belief, the increment and benefits you offer to the employee will actually prove to be more expensive than the hiring process of the replacement.

Extend Counteroffers To Resigning Employees

Of course, this depends on various factors, like the nature of your extended counteroffer and position. 

But more often than not, when you replace the employee with a skilled candidate, it will cost you less. Additionally, retention will not give you a long-term solution; hence you will end up paying a lot more than necessary.

Not Easy To Find A Middle Ground

When you extend a counteroffer to an employee, there is high chance that he will present you with demands. Usually, this is because  requirements have changed over the course of time. However, your business is the same, and so are its needs. Hence, you will soon realize that your ability to meet expectations is pretty limited.

Even if you are willing to be flexible and go the extra mile, it’s highly unlikely that you will be able to agree on something that will be beneficial for both parties. Most of the things you will agree on will merely be short-term solutions instead of long-term strategies. And we all know that businesses cannot thrive for long if they rely on short-term solutions.

As an example,an employee wants to polish a specific set of  skills. However, those skills don’t really benefit your business. So should you try to retain this employee, offer them higher pay, and agree to the changes when it wouldn’t benefit the company? Likely not. 

Setting A Wrong Precedence 

When you extend counteroffers to hold onto an employee, you basically set an example. Even if the employee chooses to leave despite your offer, the tone is set. Other team members will try to use this as a strategy to make you agree to their terms. 

And if companies decided to bend for every employee, would it be able to sustain for long? Highly unlikely. 

Why Do So Many Employers Make Counteroffer Mistakes? 

When there are so many downsides to extending counteroffers, why is it such a common practice? What makes employers try hard to retain their employees? Because counteroffers aren’t all bad. T There are some pros of counteroffers that lure employers.

Extend Counteroffers To Resigning Employees

For one, employers don’t want to lose their talent. And they also value the relationship with the existing employees. Every team member contributes to the company in one way or the other. So naturally, employers would want to do whatever possible to hold onto them. 

Recruiting new talent  takes time and effort. And a little bit of risk is involved too. There’s always a chance that the person you hire will not be able to adjust to your work environment.

And, of course, companies want to ensure that they don’t lose their talent to the competition. After all, they have nurtured this talent and wouldn’t want others to benefit from it.

Yes, there are some tempting benefits of extending counteroffers. In the long term, these counteroffers won’t do much for your employee base.

An Alternative To Extending Counteroffers That Can Do Wonders 

If you really value the employee, let that individual pursue a new journey happily instead of burning bridges. Keep the door open for them in case they want to return in the future.

A lot of employees realize soon after leaving their company that they aren’t happy with their new role. They were more satisfied with your team. Let them come to this conclusion themselves without any prodding. Let’s not forget the grass isn’t always greener on the other side.

Your employee might not get what they were looking for in the new job, which would make that individual want to return. And you have to make it clear to them that if such a situation arises, you will be more than willing to welcome them back.

We help employers avoid crucial counteroffer mistakes. We work with them to ensure that they offer a competitive total compensation package to their employees. At the same time, we also listen to the expectations of the employees to ensure that your offer meets their requirements.

Katalyst Group is both an agent and a guide. We work for the benefit of both the employer and the employee. It’s our job to ensure that no one is left with a shorter end of the stick.

Also read: The Top 11 Hiring Trends in SMBE Finance and Accounting


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