Counteroffers are a popular retention strategy, but they aren’t sustainable

For the last couple of years, employees have realised the power they have and are leveraging it for better opportunities. Employers are responding to this with counteroffers; however, there is a larger issue at hand.

Research from Robert Half has uncovered that 58 per cent of Australian employers have reported an increase in job candidates accepting counteroffers from their existing employer compared to 12 months ago.

This solution may prove to be a futile one, as 80 per cent of employers do not agree that counteroffers are a good way to retain employees in the long term. Employees agree, with 22 per cent noting it would only motivate them to stay for a short period.

Cost-of-living pressures are prompting employees to request higher salaries, with over half (51 per cent) of employers recognising an increase in candidates requesting a higher salary after receiving a counteroffer from their current employer, over the last 12 months.

“Cost of living is top of mind and, even though job security is a priority, so is salary. Employees continue to be on the lookout for better opportunities and conditions, considering all options that are put on the table, including offers from their current employer who have the edge when it comes to job stability,” commented Robert Half director Nicole Gorton.

“While employers may find it easier to make a counteroffer, counteroffers rarely achieve retention. They simply delay rather than save the costs associated with hiring as, more often than not, employees end up leaving the organisation.”

Most agree that counteroffers have become more prevalent in recent times, with 42 per cent of employers agreeing versus 39 per cent who disagree.

With the futility of these initiatives shown, leaders should be looking towards retention strategies rather than leaving it too little too late with counteroffers.

“Rather than relying on reactive counteroffers, companies should proactively address their retention policies to ensure their teams feel heard, valued and therefore less receptive to offers from competitors,” Gorton said.

“On the employee side, workers need to reflect deeply on what prompted them to look for a new job in the first place. Was it only about salary and extra benefits? In most cases, there are other factors at play that made an employee feel like leaving, and these concerns will typically remain despite a better package. When it comes to accepting a counteroffer, the risks are often higher than the rewards.”

Listen to the needs and wants of employees. With inflation hurting businesses as much as it’s hurting employees, retention strategies that prioritise wellbeing and benefits could even prove to be cheaper than inflated counteroffers.