Counteroffers are job offers made in response to an employee being presented with a contract or position at another organisation. Counteroffers are usually made when employees are deemed too valuable, experienced or talented to lose.

But they can be risky, and for the most part, not effective solutions to larger staff retention issues. Here are five reasons why counteroffers won’t improve employee retention, and how they can negatively impact your team.

1. Your employee has already checked out

Once an employee commits to finding and securing a new role, chances are they’ve already checked out of their role at your organisation. Presenting staff who are practically out the door with more money or improved benefits might keep them at your organisation, but for monetary reasons alone. If employees have emotionally and mentally departed your organisation than a counteroffer will not guarantee you keep their enthusiasm and passion for work. Employees who have sought other work may also believe a counteroffer is too little action, too late. If they were really valued, why wasn’t more done earlier to keep them?

2. They might leave anyway

Say you offer a finance executive who secured a role at a similar firm a higher salary or a more senior job title. What’s to say this will be enough? Many employees look for new jobs when they seek further career growth or greater acknowledgement for their work. As such, counteroffers may succeed in keeping the financial executive at your organisation initially, but if there are no skills development opportunities and no strong employee recognition program in place, then within a few months, this employee may be searching the job market again. Should they commit to leaving, you’ve lost time and money that could have been invested in securing a new and more engaged staff member.

3. Counteroffers can set a dangerous precedent

If one staff member is able to secure an elevated job title or more flexible work arrangements through the employment counter offer process, then other employees may start to demand the same. Counteroffers then become a bargaining tool for candidates who have seen what can be negotiated when they flag their interest in another role.

4. You neglect new talent

Employing new staff members means bringing in new knowledge, experiences and fresh perspective to your organisation. This can be invaluable for growth and remaining competitive in your industry. While experienced staff may be knowledgeable and reliable, counteroffers imply that there are no better candidates in the market. Counteroffers may also lead you to pay an employee significantly more than the industry standard, for skills or experience that are not any more advanced or unique. Always search the market and explore your networks for capable and enthusiastic candidates before considering a counteroffer. If your organisation is successful, inclusive and rewards staff adequately, then you should have no trouble finding a suitable replacement.

5. Relationships with staff deteriorate

Perhaps one of the worst effects counteroffers can have is on the wellbeing and morale of other staff in your team or department. Counteroffers can be the source of tension and distrust in teams, and previously strong relationships can deteriorate as a result. As a hiring manager, consider and answer these questions before you commit to an employment counter offer:

  • What if the returning employee regularly criticised the organisation’s projects, values or staff?

If a staff member returns to the workplace with a known dislike for company policy or is difficult to collaborate with, team morale may suffer as a result. Colleagues may feel less likely to speak openly and work transparently, making for less confident and productive staff members.

  • Do existing staff now feel that they are not being compensated properly for their work?

You offered an IT administrator a 5% increase in annual salary as part of a counteroffer deal. How do employees with the same title feel? Consider that a counteroffer could make existing staff feel undervalued and dissatisfied, eventually driving them to look for a new job in which they are more appreciated.

  • What strategies should managers implement to ensure all staff stay productive and happy?

Managers have the challenging role of needing to find innovative ways to lead teams with staff who’ve returned through employment counteroffer schemes. Knowing that there may be some dissatisfaction from current staff, and that the returning staff member may not be as engaged as they once were, managers may be required to devote valuable time to creating new strategies, taking away from their other work and projects.

Counteroffers come with enough risk and concern as to render them ineffective solutions to staff retention. They come with the risk of upsetting existing staff and altering the positive culture of your workplace, a lasting negative impact that bears more than just financial costs.