Four out of ten employers are ending up having to propose counter-offers in an attempt to keep hold of key members of staff. Research shows that nearly 60% of employers in London have felt the need to match salaries with a competitor, or offer higher than them in the last year just to retain an employee. Research has found that in response to skills shortages, 45% of companies had increased wages.
Are counter-offers effective in retaining employees?
With this in mind, businesses who have used counter-offers on previous occasions expect to have to offer even more increases in the up and coming year as challenges continue to emerge in recruitment. In fact, over 50% had increased the number of counter-offers in the last year.
Despite this, only around 20% of employers who make counter-offers provide a formal policy on it. Not offering a formal policy and approach to counter-offers can be dangerous for your business because it poses a threat to a transparent reward scheme for your employees.
For many employers, counter-offers may only work properly as a short-term solution as, if retention problems are not resolved, workers might still move on if expectations are not met.
On top of this, around 30% of employers think counter-offers are not effective. On the other hand, 45% believe counter-offers are good tools for retaining employees for another 12 months.
With counteroffers being so widespread it does suggest that they provide a significant role in matching talent and jobs. Employers need to approach counter offers with caution, however, and offer a clear internal process for when the situation arises.
Counter offers can assist in retaining key staff. Despite this, there are some risks which come with implementing counter offers. One example of this is that counteroffers may exacerbate pay gaps, cause equal pay difficulties, or result in a drop in employee engagement from other workers. They may also only be a short-term solution for retaining an employee.
Is there another solution to making counter-offers?
Businesses should also look into other methods of rewards for employees other than their salary. These rewards could involve flexible working, additional paid holidays, opportunities for career development, or increased pension contributions. These benefits will attract employees to stay and could be used as an alternative to a counteroffer.
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