· 3 min read · Features

Counter-offers: Why money isn't always the best policy


"Show me the money" was a phrase that worked for Tom Cruise in the film Jerry McGuire but in today's more buoyant jobs market, counter-offers of money alone aren't always the answer to retaining talent from the offers of rival firms.

The jobs market is looking encouraging, unemployment is at its lowest for four years and, according to the Institute of Leadership and Management (ILM), a fifth of workers are looking to change jobs this year. But with recruitment on the up and employees more confident in switching jobs, employers are facing growing pressure to make clever counter-offers to keep hold of staff.

The majority of employers make the mistake of just throwing more money at the employee in the hope that an instant pay rise will be enough of a reason to stay. Within Prime Time Recruitment alone, one of our multi-sector recruitment brands, we've seen close to 25% pay rises coming in counter-offers to hold on to staff.

There's no doubt that more money - minus the risk of having to change jobs - is hard for most staff to refuse, but our stats show that 67% of Prime Time Recruitment candidates who accepted a counter-offer by an existing employer returned to us within three months to, once again, look for another job.

Money is rarely the primary reason for wanting to switch jobs. It is one of the reasons but generally people move to a job that offers better career opportunities, development or training even if it only pays slightly more. Many candidates are even willing to take a pay cut if the position provides better career advancement.

Of course, employers have to consider the expense of replacing an employee and the cost of a vacant position. But whether you're making a counter-offer to retain an existing talent or to attract a new employee into the firm, there are certain points to consider before making a counter-offer:

Don't just "show them the money"

Find out the real reasons why the member of staff handed in their notice in the first place and address each of these concerns individually. If an employee's needs can be met then let them know and provide evidence in writing to show that procedures are in place or steps will be taken to meet their requests. If a large pay rise is part of the deal to stay, remember to set expectations as often this means no more salary increases for several years.

Don't promise the earth

Some employers start promising the earth in a panic to retain an employee away from a rival offer only to realise they can't deliver to these promises once the employer has turned down the other offer. This just causes resentment and leads to the employee looking for another job months later.

Consider temporary and interim staff

If you can't compete against your competitor's offer then consider interim and temporary staff as a way to fill an employment gap.

Be aware of gazumping

Some savvy staff, particularly those with specialist skills in short supply, may use the counter-offer culture purely as a means to generate a pay rise by playing the current employer off with the potential employer. Whether you're the existing or the potential employer, be wary of staff only interested in a big salary increase; the employee could just be using a rival job offer as a bargaining chip to force their boss into a pay rise with no plans to leave their employer.

Not only does the interview process waste time and money to all concerned but an employee that resigns purely to get a pay rise may not be considered by their colleagues and peers as committed to the role. The best way to increase pay is for staff to have an honest discussion with their boss.

Be prepared

As the job market strengthens a lot of sectors, particularly those such as engineering and IT, which are suffering skills shortages, are becoming candidate-driven markets. Companies recruiting in highly skilled sectors should expect candidates to be incentivised to stay by their existing employer. They should develop a short list of three or four candidates for every role they are looking to fill, so they have suitable back-up options should one be pursued to remain in their job.

So if you do have a candidate knocking on your door with a letter of resignation don't just show them the money. Money can be an incentiviser and motivator but up to a point. It's a novelty that soon wears off when an employee's career remains stagnant or staff around them continue to receive pay rises.

Find out the underlying reasons why they want to leave and accept an alternative offer and if you can't fulfil these needs, then sometimes it pays to just walk away and not to get involved in counter-offer negotiations.

Phillip Ullmann (pictured) is CEO of multi-brand recruitment organisation, Cordant Group