Should You Make a Counteroffer to a Current Employee?

Image of someone making a counteroffer to an employee“I wanted you to know: I got a counteroffer from another company.”

While you may have been prepared to hear these words, you may not know exactly what you should do next. Should you let the employee go, or make an effort to encourage them to stay?

Here’s what to consider – and how to proceed.

Counteroffers: Pros and Cons

The decision to offer an employee more money often depends less on your own budget considerations than it does on the specific employee. While you should keep your budget in mind, it’s also important to consider the following points.

  • Pro: You may be able to keep outstanding talent. If the employee is one of your best people, a counteroffer may ensure they stick with you instead of joining a competitor’s team.
  • Con: Staying may not be in the employee’s best interests. If the employee’s desire to leave is rooted in something other than compensation, a counteroffer may make them stay in the short term, but increase their dissatisfaction in the long term.
  • Pro: A counteroffer may be less expensive than a new hire. Turnover is costly, and a counteroffer may be more cost-effective than the lost productivity and expenses of finding a replacement candidate, especially if the employee’s skills are in short supply.
  • Con: You may be creating a race toward higher salaries. If your offerings are already competitive, a counteroffer may create unnecessary upward pressure on your staffing budget.
  • Pro: A counteroffer can be a vote of confidence. For an employee who leaves because they feel undervalued, a counteroffer can be your strongest expression to the contrary.
  • Con: Extrinsic motivation only lasts so long. If the employee’s heart is no longer with this company, any motivating effects from a counteroffer are likely to be short-lived and result in bigger problems when they wear off.

If the employee appears to be a good candidate for a counteroffer, here’s how to improve the chances they will accept.

How to Make a Strong Case

Talk to the employee.

Ask the employee what made them start looking for a new job in the first place. What is it about the offering employer that compels their interest?

Listen carefully to the answers. While a counteroffer may be needed even if money isn’t the primary consideration, you’ll want to focus on addressing all the employee’s concerns, not just those related to compensation.

Strategize at once.

While it’s unlikely you can make any promises during the meeting – and you should alert the employee to this fact – it’s important to make addressing the employee’s concerns a top priority. For instance, if the employee is frustrated at a lack of promotion opportunities, an offer to “play headhunter” within the organization can mean as much or more as a salary increase.

Talk to your recruiter.

Staffing partners specialize not only in connecting their clients with outstanding candidates, but in helping their clients retain their top talent as well. Ask your recruiter for help in crafting a counteroffer. If your counteroffer ultimately fails, your recruiter can help you find another candidate with the same outstanding traits.

At TERRA Staffing, our recruiting partners can help you find and keep outstanding talent. Contact us today to learn more about our recruitment services in Phoenix, Seattle and Portland.

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