How to counter offer without destroying existing staff morale

Many of you may have experienced that sinking feeling when a valued employee hands in their resignation letter. When you learn that your star employee has a juicy offer in hand from the competition, this makes it all the worse. This represents a very delicate PR situation as the soon-to-be-departed’s colleagues will be watching their employer’s actions carefully:

• Does the business let the employee walk without a re engagement attempt? Doing so could make the company appear aloof and out of touch, which is not a good look.

• On the other hand does the business roll out the red carpet, elevate the soon-to-be-departed to business class terms and conditions to retain them, while the other employees back in economy class look on in disgruntlement?

This is a quandary that many HR professionals and people managers face and whether they choose to counter offer or not is entirely dependent on individual circumstances. But, in our competitive environment employers are increasingly choosing to use counter offers to keep valued staff. 

40% of people managers made counter offers in the last year

This research from the CIPD in early 2023 revealed that 4 in 10 people managers in UK companies had used counter offers in the last year to try to convince an employee to stay. 

On the whole these counter offers worked, with 45% of respondents believing that counter-offers are effective in retaining employees compared to 29% who believe it is ineffective.

What was particularly interesting was the finding that of those that use counter offers as part of their retention strategy, 38% matched the salary of the new job offer, and 40% offered even higher sums. The issue here is that retaining an employee using an off-cycle pay rise can send shockwaves through the surrounding team who may feel overlooked which could lead to a morale crisis.

Three tactics to make a counter-offer without destroying morale

So, how can employers counter-offer without destroying the morale of existing staff? Here are three tactics we believe could help in these awkward situations.

1. Ensure the enhanced counter-offer comes with visibly greater responsibilities

The first is to clearly link the counter offer to additional duties and greater responsibilities, such as managing staff or taking on a first-time or bigger commercial target. This shows everyone that the employee is not simply receiving money for nothing, which could otherwise lead to a dangerous chain reaction of copy-cat requests. This narrative can serve to quell any feelings in colleagues that the pay rise is undeserved because the enhanced counter-offer is being clearly matched with enhanced duties. 

If the retained employee’s new responsibilities serve to benefit their colleagues too, then all the better for morale too.

• Do an across-the team pay and job review alongside the enhanced counter-offer

If the financially enhanced counter-offer simply reflects a market correction, existing employees may expect equal treatment, e.g. a simple market correction of their pay to the going market rate. If this situation is not addressed, colleagues could feel undervalued which could reduce engagement. 

A good way to mitigate this could be to conduct an across-the team pay and job review alongside the enhanced counter-offer, where pay is benchmarked and adjusted where necessary to fit the going rate.

Done right this intervention can be used to refocus and re-galvanise the team, boosting staff engagement and staff retention.

• Non-monetary counter offers can sometimes trump pay concerns

The last tactic is to throw a curveball. Increased pay can often be at the heart of a counter-offer. However, if you probe your soon-to-be-departed employee you could discover more important non-monetary factors which if offered could trump pay concerns and motivate your employee to reconsider their decision to leave. Superior flexible working options, additional paid holidays, a more attractive job, or a more structured career pathway could all potentially entice your employee to stay, without the need for enhanced pay.

The last and perhaps most important tactic might be preparedness. CIPD research showed that just one in five employers that make counter offers have a formal policy regarding them. This is remarkable given that counter-offering is now a frequent event, and a significant amount of employers have not been able to make them work effectively.

By developing a formal counter offer policy, incorporating industry best practices, employers can optimise the counter-offer process and ensure it is used not only to retain staff, but to address problems which may have led to the initial resignation. It can also be used to refocus and re-galvanize the retained employee and wider team going forwards.