Why Employers Shouldn't Make Counteroffers – And Why Employees Shouldn't Accept Them

Today's job market is more competitive than ever, for both employers and candidates. This is particularly true with regard to skilled technology, finance and accounting positions. (The unemployment rates within these industries is low, between just 1%-2%.) In such competitive fields, companies are always vying to attract and retain talented professionals and this cycle of wooing employees can lead to managers being tempted to make a counteroffer to keep gifted employees on their team. But does a counteroffer really benefit either side?

Here's what employers should consider when thinking about a counteroffer:

A counteroffer rarely, if ever, ends in a positive way for an employer. No manager wants to lose an employee that has hard-to-find or specialized skills, but remember: a truly happy employee does not quit. It is rare that salary is the only reason an employee plans to leave. If you are thinking of making a counteroffer to keep a talented employee, consider the three points below.

1. A counteroffer is temporary. There is a reason your employee wanted to leave and that underlying reason doesn't really change just because you've made a counteroffer. It's more likely that an unhappy employee will be gratified temporarily by a higher salary, better benefits, or perks, but after the "thrill" wears off, the underlying problem will again bubble to the surface and the employee will again feel dissatisfied.

2. Word of the counteroffer will spread. Other employees are likely to learn about the counteroffer and the offered salary increase, and they may expect similar treatment if they also bring a new job offer into your office. A counteroffer can upend your pay scale as restless employees demand a salary match for their new offers. Employees will not feel loyal to your company if they feel as though the only way to get a raise or promotion is to leave the company.

3. It could negatively impact morale. As word of the counteroffer spreads, you may be inadvertently spreading discontent among your team if they perceive that you have given special treatment to the leaving employee. You do not want to set the precedent that the way to move up in the company is to threaten to move out. The perception of "playing favorites" can demotivate your team.

Here's what employees need to think about before accepting a counteroffer:

When discussing a new job offer with your current manager, he or she may make a counteroffer. The higher salary and other benefits can be tempting, but was money the only reason you wanted to leave or was there something more behind your decision? If there were other issues behind your desire to leave, they will still be there even if you are making more money. The benefits of the counteroffer will only be a temporary fix.

You should also consider that when you accept a counteroffer, you are also confirming to your employer that you were unhappy with the company. Some employers may subconsciously (or even consciously) limit your development within the organization if they feel that you lack dedication and loyalty to the company. A counteroffer may make it more difficult to advance up the employment ladder and you will again be faced with the need to leave in order to make progress in your career.

In conclusion…

Counteroffers should be avoided on both sides. The best way to avoid a counteroffer situation is for employers and employees to sit down together on a regular basis to discuss the employee's goals and how they align with the company's mission. These meetings can be an effective way to identify and solve issues on both sides.