Counter offers: the right decision or a short-term fix?

Few situations create more uncertainty for employers and candidates than a counter offer.

An employee resigns after accepting a new opportunity. Their employer responds with an improved salary, enhanced benefits, greater responsibility, a promotion or promises of future progression. The employee must then decide whether to remain with their current organisation or continue with the move they have already committed to.

Counter offers have become increasingly common across the wider UK employment market. CIPD research found that 40% of UK employers had made one during the previous 12 months. Among those employers, 38% matched the salary offered by the prospective employer and 40% offered more.

While these findings relate to the wider UK employment market rather than specifically to Asset Finance & Leasing, they demonstrate how frequently counter offers are being used to retain skilled employees.

Sometimes they work. Sometimes they simply delay an inevitable departure.

The important question is not whether a counter offer should automatically be made or rejected. It is whether it genuinely addresses the reasons the individual considered leaving in the first instance.

Why counter offers happen

From an employer’s perspective, the reasons are understandable.

Replacing an experienced professional can be expensive, time consuming and disruptive. Customer relationships may be affected, projects delayed and additional pressure placed on colleagues while a replacement is recruited and brought up to speed.

Retaining the employee can therefore appear to be the quickest and least disruptive solution.

For candidates, receiving a counter offer can be flattering. It provides immediate recognition and reassurance that their contribution is valued. The improved package may also remove some of the uncertainty associated with joining a new organisation.

However, the decision should not be based solely on the immediate financial or emotional response. Both parties need to consider what has meaningfully changed and whether the new arrangement is sustainable.

The employer perspective

Counter offers can deliver genuine short-term benefits.

They can retain specialist knowledge, maintain business continuity, protect customer relationships and avoid the immediate cost and disruption of recruiting a replacement.

Before making one, however, employers should understand what prompted the resignation.

Remuneration may be part of the explanation, but it is rarely the only consideration. Career progression, leadership, workload, organisational change, recognition, culture, flexibility and confidence in the future can all influence an employee’s decision to explore the market.

If those concerns remain unchanged, increasing salary alone is unlikely to provide a lasting solution.

Employers should also consider the implications for the wider team. A significant salary increase or promotion following a resignation may create internal pay inconsistencies and encourage others to believe that an external offer is the most effective route to recognition or progression.

This does not mean that counter offers should never be made. It means they should be consistent with the organisation’s remuneration and retention strategy, rather than being an isolated reaction to the prospect of losing someone.

Employers should also be realistic about their effectiveness. Although the CIPD found counter offers to be widely used, only 45% of employers believed they were effective in retaining employees for at least 12 months.

The candidate perspective

Receiving a counter offer can be both rewarding and difficult.

Your employer may offer an immediate salary increase, a revised title, greater responsibility or a clearer path to progression. Staying also avoids the uncertainty of moving to a new organisation, adapting to a different culture and rebuilding professional relationships.

However, before accepting, it is important to revisit the reasons you decided to leave.

Consider:

• Why did I begin exploring other opportunities?
• Which of those concerns have genuinely been resolved?
• Am I staying because the role has improved or because the remuneration has increased?
• Which opportunity best supports my long term career objectives?
• How am I likely to feel about this decision in 12 months?

Financial reward is naturally important, but career development, leadership, job satisfaction, culture and future opportunities often have a greater influence over the course of a career.

Candidates should also distinguish between confirmed changes and future promises.

A revised salary can usually be implemented immediately. Promises of future promotion, broader responsibilities, improved flexibility or organisational change may depend on circumstances that have yet to materialise.

Before accepting a counter offer, establish what has been formally agreed, when it will take effect and how progress will be measured.

What we have observed

Having specialised exclusively in Asset Finance & Leasing recruitment for more than two decades, we have supported employers seeking to retain valued employees and candidates deciding whether to accept counter offers.

Every situation is different, but one observation has remained consistent.

Counter offers are most likely to succeed when they form part of a genuine commitment to improve the employee’s overall position. Where the response is limited to an increase in salary and the original concerns remain unresolved, the counter offer is more likely to postpone a future move than prevent one.

This is also consistent with wider HR research. A WorldatWork study found that 73% of respondents regarded their organisation’s counter offer practices as either ineffective or only marginally effective. The research was conducted among reward and HR professionals and was not specific to the UK or Asset Finance & Leasing, but it supports the principle that remuneration alone is rarely an effective retention strategy.

When counter offers can work

Despite the risks, counter offers can be the right decision.

They are most likely to succeed when they are supported by meaningful and sustainable change, such as:

• clearly defined career progression
• increased responsibility or a genuinely revised role
• remuneration that better reflects market value
• changes in leadership or organisational structure
• improved flexibility or work-life balance
• a renewed commitment from both employer and employee.

The key is that the counter offer addresses the reasons behind the resignation rather than simply increasing the cost of leaving.

Successful counter offers are rarely about persuading someone to stay.

They are about giving them a compelling reason to want to stay.

Warning signs to consider

Certain factors may indicate that a counter offer is unlikely to provide a lasting solution:

• the principal response is an increase in salary, with no discussion about the wider reasons for leaving
• promises are made without defined actions or timescales
• the original concerns remain largely unchanged
• the decision is driven by urgency rather than long term planning
• trust or confidence between the employer and employee has already deteriorated
• the employer would not have offered the improved terms without a resignation.

None of these factors automatically means that a counter offer is the wrong decision.

However, they should encourage both parties to consider whether the situation has genuinely improved or whether the immediate problem has simply been deferred.

Questions employers should ask

Before making a counter offer, employers should consider:

• Why does the employee want to leave?
• Can the underlying concerns be resolved?
• Would we make the same offer if they had not resigned?
• Is the revised package consistent with our wider remuneration strategy?
• How might the decision affect colleagues in comparable roles?
• Are we retaining the employee for the right reasons, or simply avoiding short-term disruption?

Questions candidates should ask

Before accepting a counter offer, candidates should consider:

• What originally prompted me to look elsewhere?
• Which changes are confirmed and which are only promises?
• Why were these improvements not offered before I resigned?
• Has my long term career position genuinely improved?
• Will my relationship with my employer change?
• Which opportunity would I choose if the salaries were the same?

That final question can be particularly revealing.

Removing the immediate financial difference often makes it easier to identify which opportunity offers the stronger long-term career outcome.

“A successful counter offer does not just change the salary. It changes the reason for staying.”

Key takeaways

• Counter offers are widely used, but employer confidence in their long term effectiveness is mixed.
• A higher salary rarely resolves concerns relating to progression, leadership, culture or job satisfaction.
• Employers should consider the effect on internal pay structures, team dynamics and future retention.
• Candidates should distinguish between immediate, confirmed changes and promises that may not materialise.
• Counter offers are most likely to succeed when they create a genuinely improved long term opportunity.
• Where the original reasons for leaving remain, accepting a counter offer may simply delay the eventual move.

Final thoughts

Counter offers are neither inherently good nor bad.

In some situations, they retain outstanding employees and create a stronger long term relationship. In others, they postpone an inevitable departure because the reasons behind the resignation were never fully addressed.

For employers, the objective should not simply be to prevent someone from leaving. It should be to understand why they wanted to leave and decide whether the organisation can provide a genuinely better future.

For candidates, the immediate reassurance and financial recognition of a counter offer can be attractive. However, the decision should be assessed against the opportunity that first encouraged them to move and the longer term direction of their career.

Open communication, realistic expectations and confirmed commitments will produce better outcomes than decisions made under the immediate pressure of a resignation.

Ultimately, the right decision is not determined by which organisation offers the most compelling reason to avoid change. It is determined by which opportunity provides the strongest reason to move forward.