The great resignation: Should I make a counter offer to an employee who has resigned?

They’re calling it the Great Resignation, but when you’re an employer, there’s nothing great about it. In the U.S, the U.K. and elsewhere, businesses are losing staff in record numbers. Some employees are leaving to pursue new career adventures, driven by the pandemic to shake up their lives. Others have perhaps been considering a move for some time but only now feel confident enough in the job market to begin their search. Employers at the receiving end of multiple resignations are in an impossible situation. What should they do? Making a counter offer might seem like the only way to hold on to a valued member of staff, but is it the best one?

Money talks

Regardless of whether it’s the right approach, money is the main weapon businesses are using today in the war for talent. We’re seeing employers offer salary rises of up to 25 percent in a bid to hold on to staff who have tendered their resignation. This is understandable; in today’s candidate-short market, employers are left with a difficult choice. Should they let this person go given that their commitment to the company is now in question? Or should they offer them an incentive to stay, on the basis that this is less disruptive and resource-intensive than having to recruit, onboard and train someone new? Right now, the majority of businesses are opting for the latter, and we’re seeing more counter offers on the table than in a very long time.

What could go right?

Can a counter offer ever work in the employer’s favour? In the short term, yes, it can. It helps to retain talent and knowledge at a time when businesses can ill afford to lose either. It also eliminates the cost and effort involved in recruiting a suitable replacement in a competitive market and getting them up to speed. However, arguably, holding on to someone who may feel disenchanted or undervalued is simply a temporary fix that delays the inevitable.

What could go wrong?

Research and experience show that counter offers rarely have a happy ending. Offering someone an increase in salary and/ or additional benefits might persuade them to stay for a time, but often the reasons they wanted to change jobs in the first place don’t go away and they’ll leave the business anyway. In the majority of cases, candidates call us up within six months of accepting a counter offer wishing they’d taken up the opportunity to move on instead.

Sometimes, not earning enough is the reason candidates cite for wanting to jump ship. In this case, we always recommend they broach the subject with their boss before applying for jobs as it’s an issue that could be resolved with an honest conversation.

However, people rarely leave a job for money alone. Typically, it’s down to more deep-rooted issues such as a lack of career progression, a need for a fresh challenge or, increasingly, a desire for a better work/ life balance. Clearly, a higher salary won’t resolve any of these.

Even if the employee who accepts your counter offer defies the odds and stays for the long haul, the question is whether you can ever trust them and their loyalty in the same way again. You may be able to forgive the fact that they wanted to leave, but will you be able to forget?

Ripple effect

An employee accepting a counter offer can also have a knock-on effect on the wider business. Once word gets out that a co-worker has been able to secure a raise, employees may feel encouraged to ask for more money too. This can result in more counter offer negotiations and salary increases, incurring a greater cost than you’d initially anticipated and creating an imbalance in your salary scales. Ultimately, if you end up having to offer higher salaries across the board, it could lead to wage-led inflation.

What to do?

So, given the shortcomings of counter offers as a long-term retention tool, what should you do if an employee resigns?

Your first step should invariably be to better understand their motivations for wanting to leave and whether it’s an issue that can be resolved.

If they seem to believe in the business and, aside from their immediate concerns, can see a future working there, then it’s worth working towards a solution that addresses their source of discontent – whether that means offering additional training, greater responsibility or extra days working from home.

However, if you sense that they’ve already checked out and your company can’t provide what they’re looking for, then it may be time to say goodbye. This may seem counter-intuitive if you’re already short of staff, but it will be the best course of action for your business in the long term. Managing and motivating an employee whose heart isn’t in the job can be draining and unproductive – it’s better to devote your energy to finding their replacement.

Prevention is better than cure

Ultimately, though, your priority should be to ensure that as few employees as possible reach the stage of resigning. That means offering salaries, benefits and career opportunities that are competitive and consistent with what employees today demand and, indeed, expect.

There still may be times when a counter offer feels like the only solution – but by conducting regular salary reviews to check that you’re paying the industry rate, mapping out clear career paths to help employees progress and offering flexible working to support work/life balance – you’ll be closer to creating the kind of workplace where employees feel valued and are inclined to stay. And if you do need to replace a departing employee, you’ll be primed to attract the brightest and the best.

Author David Morel Tiger Recruitment Team