How to handle a counteroffer

Roughly 50 per cent of candidates that resign will be offered a salary counteroffer by their current employer. Here we’ll cover how to handle a counteroffer, including what you need to consider in your decision and steps to follow through on your choice.

Why employers counteroffer

In a skills-short market where top-tier talent is part of a shrinking pool, counteroffers are on the rise. Departing employees often cite a number of reasons for leaving a company:

• Inadequate salary
• Feeling undervalued or underappreciated
• Limited prospects for development or training
• Career change.

While not much can be done for the last point, employers will typically tempt a departing employee to stay by offering an improvement that addresses the top three. This could be a higher salary, better job title or future promises. The employer may go as far as saying that promotion was just on the horizon but kept confidential, or they were unaware the employee was dissatisfied.

Deliberating: Factors to consider

Having career improvement talks once an employee has already handed in their notice can result in a big salary hike or immediate promotion. But it’s worth considering the employer’s possible motives in this situation:

• It’s usually cheaper to retain staff instead of retraining new employees.
• If key staff are leaving, this could reflect poorly on the company. The current employer may move to protect their reputation by retaining staff, especially if the staff are known in the business or regionally.
• It’s less disruptive to business and safeguards company information.

Before jumping at the offer, consider:

• Does the counteroffer address your original motivations for leaving or are the issues deep-seated in the company?
• Is compensation your main and only reason for resignation or is it instead born from a desire to further your career?
• Will resigning and then retracting your resignation affect your standing in the company?
• Will accepting the counteroffer affect your long-term career goals?
• Will accepting the counteroffer affect your reputation in the market, particularly with the company you interviewed with?
• What are the motivations of your employer that are beneficial for you?
• Do you understand the terms of the offer and counteroffer, especially when it comes to things like equity?

A 2019 HBR survey found that 40 per cent of senior leaders believed accepting a counteroffer from a current employer would adversely affect the recipient’s career. Further, 80 per cent of executives said they would have diminished trust in the employee who submitted their resignation if they decided to stay. One of the key survey respondents actually goes as far as saying “counteroffers don’t work 95 per cent of the time”.

How to handle a counteroffer

Once you’ve decided on your course of action, it’s important to keep things professional with your current employer. If you decide to stay at the company, ensure the counteroffer is in writing and the benefits are quickly negotiated into a new contract. If, however, you decide to leave, take the opportunity to politely state your reasons for leaving. Thank your former employer for the learning and support but explain that it is time to move on.

Counteroffers are a delicate situation and it’s often best to talk through your options with a trusted advisor. A recruitment consultant can offer an unbiased ear and explain the terms of each offer. They can also talk about the implications for your particular situation and career aspirations.