Counter Offer: What HR Should Know Before Making One

When an employee resigns, HR may face an important question:

Should the company make a counter offer to convince the employee to stay?

A counter offer can help retain an employee, especially when they have valuable skills or experience. However, it is not always the best solution.

Before making a counter offer, HR should understand why the employee wants to leave, what the company can realistically offer and whether the offer will solve the real problem.

What Is A Counter Offer?

A counter offer is an offer made by an employee's current employer after the employee has resigned or received a job offer from another company.

The goal is to encourage the employee to stay.

A counter offer may include:

A higher salary
A promotion
A new role or responsibilities
Flexible working arrangements
Better benefits
Career development opportunities
A one-time bonus

For example, an employee resigns after receiving a job offer with a higher salary. Their current employer may offer a salary increase and promotion to encourage them to stay.

Why Do Companies Make Counter Offers?

Replacing an experienced employee can take time and money. The company may need to advertise the vacancy, screen candidates, conduct interviews and train a replacement.

The company may also lose valuable knowledge and experience when an employee leaves.

Because of this, a counter offer can sometimes be used as a retention tool, especially when the employee has an important role.

However, HR should not make a counter offer automatically. The company should first understand why the employee wants to leave.

What Should HR Check Before Making A Counter Offer?

The first question should not be:

“How much more money should we offer?”

Instead, ask:

“Why does this employee want to leave?”

Salary may be the reason, but there may be other issues.

Common reasons include:

Limited career growth
Heavy workload
Poor relationship with a manager
Lack of recognition
Lack of flexibility
Better career opportunities elsewhere
Job responsibilities no longer match expectations
Problems with the work environment

A higher salary may solve a pay issue, but it may not solve problems with management, workload or career development.

When Can A Counter Offer Make Sense?

A counter offer may be worth considering when the company genuinely wants the employee to stay and can address the reason behind the resignation.

The Employee Is Underpaid Compared With The Market

If the employee's salary is below the market rate, HR can review their pay based on the role, responsibilities, experience and internal salary structure.

The Employee Wants Career Growth

If the employee wants more responsibility or a clearer career path, a promotion, role change or development plan may be more useful than simply increasing their salary.

The Employee Has An Important Role

Some employees have specialist skills, business knowledge or responsibilities that can be difficult to replace quickly.

A counter offer may give the company more time to manage the transition or plan for replacement hiring.

The Company Can Realistically Make The Promised Changes

HR should only offer changes that the company can actually deliver.

A promised promotion, salary increase or flexible working arrangement should be properly approved and clearly communicated.

When Should HR Be Careful?

HR should be cautious when the employee's main reason for leaving cannot realistically be changed.

For example, a salary increase may not solve the problem if the employee wants to leave because of:

A difficult relationship with their manager
Long-term workload problems
Lack of career opportunities
Poor work environment
A desire to change career direction

In these situations, a counter offer may only provide a short-term solution.

Should HR Always Match The New Company's Salary?

Not necessarily.

A company does not have to automatically match another employer's offer.

Before making a decision, HR should consider:

The Employee's Current Salary

Is the employee already paid fairly for their role and experience?

The Market Rate

Does the external offer show that the employee may be below the current market rate?

The Employee's Performance

Does the employee's contribution and performance support a salary adjustment?

Internal Pay Fairness

Would the counter offer create a large pay difference between employees in similar roles?

The Long-Term Cost

Can the company realistically afford the new salary and benefits?

HR should also consider the message a counter offer sends to other employees. The company should avoid creating a situation where employees feel they must resign before receiving a salary review.

What Can Be Included In A Counter Offer?

A counter offer does not have to focus only on salary.

Depending on the situation, HR may consider:

Revised Salary

Clearly state the new salary and when it will take effect.

New Position Or Responsibilities

If the employee is receiving a promotion or role change, explain the new title, responsibilities and reporting structure.

Flexible Working Arrangements

Where company policy allows, flexibility may help address concerns about work-life balance or working arrangements.

Career Development

Explain available training, development opportunities or a potential career path.

Other Benefits

Depending on company policy, HR may consider other relevant benefits or incentives.

The important point is to address what is actually causing the employee to leave, rather than simply offering more money.

How Should HR Talk To The Employee?

The conversation should start by understanding the employee's reasons for leaving.

HR or the manager could ask:

“We understand that you have decided to resign. Before we discuss whether there is anything we can do, could you share what led to your decision?”

Then listen carefully to the employee's concerns.

Once the reason is clear, HR can explain whether the company can realistically address it.

The conversation should not feel like pressure. The goal is to understand whether there is a solution that works for both the employee and the company.

What Are The Risks Of A Counter Offer?

Counter offers can work in some situations, but HR should understand the risks.

The Original Problem May Remain

A salary increase cannot automatically fix problems with management, workload, career growth or workplace culture.

It Can Create Internal Pay Issues

If one employee receives a large salary increase after resigning, other employees may question why similar adjustments were not made for them.

The Employee May Still Leave Later

Accepting a counter offer does not guarantee long-term retention, especially when the original reasons for leaving remain unresolved.

It Can Delay The Hiring Process

If the employee is likely to leave anyway, spending too much time negotiating a counter offer can delay recruitment for the replacement role.

Counter Offer Vs Retention Strategy

A counter offer should not replace a proper employee retention strategy.

HR should try to understand employee concerns before they reach the resignation stage.

Useful practices include:

Regular one-to-one discussions
Stay interviews
Performance reviews
Career development plans
Salary reviews
Employee surveys
Clear promotion pathways

This gives HR an opportunity to identify problems earlier instead of waiting until an employee has another job offer.

What If The Employee Accepts The Counter Offer?

Do not assume that everything is solved simply because the employee agrees to stay.

HR should make sure the agreed changes are clearly communicated and implemented.

For example, if the counter offer includes a salary increase, promotion or change in responsibilities, make sure the relevant documentation and approvals are completed.

HR should also follow up with the employee after the changes take effect to see whether the situation has improved.

What If The Employee Rejects The Counter Offer?

Respect the employee's decision.

The employee may have already decided that moving to another company is the right career choice.

HR should then focus on making the resignation and handover process as smooth as possible.

This can include:

Confirming the notice period
Planning the handover
Documenting important processes
Transferring responsibilities
Starting the replacement hiring process

A professional resignation process helps maintain a positive relationship with the employee.

Should HR Have A Counter Offer Policy?

A clear internal process can help HR make more consistent decisions.

The policy can explain:

Which employees or roles may be considered
Who can approve a counter offer
What types of changes may be offered
How salary adjustments should be reviewed
How internal pay fairness should be considered
The role of HR, managers and senior management

Having a clear process can also prevent HR from making rushed decisions when an employee resigns.

FAQs

What is a counter offer?

A counter offer is an offer from an employee's current employer to convince them to stay after they resign or receive another job offer.

Why do employers make counter offers?

Employers may make a counter offer to retain valuable employees and avoid the time and cost of replacing them.

What can a counter offer include?

It can include a higher salary, promotion, better benefits, flexible working arrangements or career development opportunities.

Should HR make a counter offer?

It depends on why the employee is leaving and whether the company can realistically solve the problem.

Can a counter offer help retain an employee?

Yes, but it does not guarantee that the employee will stay long-term, especially if the original reason for leaving is not addressed.

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