Are you kept up at night by fear of losing your candidate to a counter offer? Maybe it doesn’t haunt your sleep, but many recruiters dread a counter offer from the candidate’s current employer. If you’re in recruiting, chances are that you lost a ‘chosen one’ to a counter offer in the last three months.
Studies have shown that at least 50% of candidates get a counter offer when they resign. 57% of them accept the offer. Therefore, it’s not just good practice, but an absolute necessity to anticipate a counter offer for every candidate who joins the hiring process.
But what is a counter offer?
A counter offer, as the name suggests, is a reactive term. It signifies the action taken by an employer to retain their employee who wants to leave their company. The employer makes them an offer with either a higher salary or additional benefits or both to counter the offer the employee has received from another company. In a crude sense, it’s bait for the employee – otherwise known as ‘your candidate’ – to bite and stay.
In a candidate-driven market where the race for talent is growing fiercely, employers are trying their best to hold on to their employees by stretching their creativity with counter offers. For example, they flatter the candidate with an immediate pay hike or a new role (that did not exist so far!).
Are employers compelled to give out counter offers?
Practically speaking, they want to retain their employees because the estimated cost of losing an employee is at least 33% of the person’s annual salary. This includes the cost of hiring, training and expenses incurred due to delayed projects. A counter offer seems to be the perfect strategy for employee retention especially when matching the new job offer is less than the replacement cost. The counter offer (at first) can restore faith. It might and wash away ill feelings that the employee harboured and which prompted them to interview with other companies in the first place.
Furthermore, the emotional cost of pleasing the known ‘devil’ can be lower than the actual cost of hiring an unknown ‘angel’. A counter offer can be monetary as well as non-monetary. It can include elements like an immediate hike in base salary, better job title or role or a stipend for career development. Oftentimes, it also includes the much coveted ‘fully remote work’ option a few months down the line or sooner.
When the counter offer arrives
Counter offers can happen at any time during your hiring process, but most likely they will appear after you have made your chosen candidate an offer. Maybe they receive it when handing in their notice, but even before or after is possible! So, what’s next? Do you give up hopes of making a hire the moment the candidate tells you about the counter offer? Or is there a possibility you can turn the situation around or even preempt it?
As seasoned recruiters, we (the acework team) have faced this problem time and again. However, we learned that a win-win solution is what is the need of the hour. In our case we developed a fact-based approach that helps both our candidates and our clients to make informed decisions when there is a counter offer on the table.
Time to rethink what’s missing
Oftentimes a lack of information or preparedness causes them to break the negotiations or to make the wrong decision.
- The candidate may not be aware of the high chance of receiving a counter offer because they hadn’t faced this situation in the past or heard about it from others.
- The client too may not be aware how the job market has evolved. Or they may not realise how the hiring process does not stop with making an offer.
- Most importantly, as a recruiter you may not have done enough to understand the candidate’s priorities.
Keeping all these points in mind, we decided to work on relationship building for navigating the conundrum of counter offers.
Learn how to use the PEA Model to combat counter offers
Imagine, your candidate (as well as your client), is unaware of the term counter-offer. What will you do? As a responsible HR partner you will want to educate and advise them on what it is, why it happens and how they can deal with it to create the most successful outcome. And so we decided to take a structured approach using a PEA model – Prepare, Educate and Advise. We use it to subvert the heartburn associated with lost opportunities. This model helps us:
- prepare for better managing a situation in which the candidate is likely to be swayed by the counter offer
- educate the candidate on the nuances of a counter offer, and
- advise the client to proactively improve their candidate experience based on quality intel about the candidate and the job market.
So what is this model about? The goal is to create a better understanding of the situation at hand and possibly make a placement in spite of a competitive counter offer.
1. Prepare: Understand the candidate
The first step is to prepare for the onslaught by arming yourself with knowledge about the candidate and their primary reason for changing jobs. Are they actively looking for a new job or just evaluating their market value or worse, just window shopping?
- Here, it’s important to understand their motivation and career aspirations by probing them right when you first establish contact with them. Although money is a great motivator for changing jobs, oftentimes it’s not the main reason. We try to uncover their frustrations in the current company. Is it the toxic work culture, is it the lack of growth prospects, compensation or bad work ethics, or a change in priorities during the pandemic?
- We also bring up the topic of counter offers during our screening process. We ask “If your current employer makes a better offer will you accept it?” or “What could prevent you from accepting a counter offer?” While also evaluating their work experience, personality and general fit for the role, we try to understand what’s driving them and where we stand in case the counter offer comes along.
A candidate may feel they are underpaid and an increase in salary is their main motivation to change jobs. Then it’s likely that they will accept the counter offer. In contrast, they may be looking for growth opportunities or a better company culture. Then chances of them accepting a counter offer which mainly consists of a pay raise will be slim.
2. Educate: Brief the candidate
Next, we educate the candidate on counter offers as we draw their attention to our client’s job offer.
- We highlight the company culture, career progression, salary, perks and other benefits. We try to make them understand why accepting our client’s offer makes sense by mapping it to the frustrations they shared in the interview. It’s good to refer to your notes and point out what you discussed regarding their motivation to change jobs.
- We also educate them on why employers make counter offers and what happens if they accept it. A fact driven approach is more suitable here. It’s important that candidates know that the counter offer is usually a rushed job or a quick fix to manage an awkward situation. More often, the relationship with the employer will likely get strained and won’t be the same as before. The (almost) resignation will always be viewed as a threat by the employee and will remain fresh in the employer’s memory. Research revealed that 80% of senior executives and 60% of HR leaders said they would trust candidates less if they decided to stay with the company. Additionally, oftentimes the employer will try to replace the employee within 6-12 months.
Studies have shown that 80% of employees who accept a counter offer leave their employer within 6 months. 60% are back in the race for a new job after 9 months.
Sometimes, a counter offer is valid for up to 180 days. This is primarily because the employer wants to ensure that, in case they don’t find a replacement, the employee can still be persuaded to accept it. That’s why we stay in touch with the candidate throughout their notice period and during their onboarding with our client.
We believe it’s worth going to extra lengths to help the candidates even after they accept the job offer from our client.
We act as their career partners and guide where necessary. This includes advice on how to draft a resignation letter, how to leave the employer on a good note, how to decide on the start date, and when to take outstanding leave/time-off.
Additionally, the anxiety of leaving their comfort zone weighs on and the candidate might find themselves playing with emotions. Here too, helping them stay focused using a logical outlook while making crucial decisions is important. You want to help them move forward by sharing the best practices.
3. Advise: Share your experiences
As an employer, you need to know the whole picture surrounding the candidate and the counter offer.
We share details on the candidate’s story with in-depth interview notes and regular feedback calls. This gives them a sense of how the candidate may react if they receive a counter offer from their employer. Furthermore, we share what we perceive to be the real motivations for the candidate to change their job.
It’s also important to address the market conditions around counter offers, especially for the most sought after skills. Place the main focus on the complete compensation package while giving ample importance to the company culture by highlighting examples of ownership and empowerment values. If you are a remote-first company, you may want to talk about remote equipment stipend, paid leave, company retreats, work-from-anywhere, and other benefits.
It’s not always possible for every client to raise the base salary just to win over the candidate. Therefore, proactively communicating the real gains of joining the new job is key.
Time is of the essence and you need to move fast with making an offer. A verbal offer is a good start to create excitement and engage the candidate. Even better than a verbal offer, put your offer in writing. Florian (name changed) an in-house hiring manager, sends out acceptance letters or offer letters to candidates. They contain the main details of the offer but are NOT the final contract. Especially in Germany it takes a while for the contract to be prepared. HR is usually swamped and they may have a couple of days turnaround on the contract. Sending the letter straight away with the verbal confirmation can give extra security and confirmation to the candidate.
It is also advisable to romance the candidate a bit. You’re eager to have them onboard ASAP and so go extra lengths to engage them by keeping in touch. Arrange special meetings in-person like lunch or coffee or arranging a special co-worker chat on Zoom. The candidate must feel valued and sought after.
These steps have proven to increase the chances of candidates not accepting a counter offer. However, research has found that 57% of employees accept counter offers made to them. So it undeniably makes sense not to spend too much time on one candidate. Know when to step back and to give a chance to other qualified candidates. After all, you want your new hires to build their careers in your company and not use you as a springboard for future job opportunities.