When it comes to offering employees a counteroffer, every situation is unique and needs to be addressed subjectively. Sometimes it’s best to extend a counteroffer, and other times, an employer needs to wish the employee well and let them go.

So, how do you know what’s best and when? Start by considering the employee’s value above replacement. Take the time to determine the costs associated with losing this person:

• Loss of productivity
• Company morale issues
• Increased attrition rate, etc.

Also, consider the price of replacing them:

• Market rate
• Scarcity of skill-set
• Recruiting costs
• Ramp-up time, etc.

If after doing this exercise the employee’s value is high, then it could be the right time for a counteroffer – if for no other reason than providing a bridge to hiring their replacement. If the value is low, then replacing him or her could be beneficial over the long term.

The downside

But there are downsides to extending a counteroffer:

• The counter does not cure all ills and at times, could make matters worse.
• The employer may feel taken advantage of and may question the loyalty of the retained employee.
• The employer may also face payroll and internal equity issues. Not only did the cost to retain that employee rise, but the costs associated with other employees could inflate as well.
• Other employees may now feel emboldened to seek their own counteroffer.
• For the retained employee, it may very well not fix anything – his or her feelings of boredom, discontent, or curiosity are not typically remedied by a bigger salary.
• The counteroffer could create internal resentment.

If you do decide to make a counteroffer, remember that you should enter into the negotiation with a good understanding of the monetary value you put on the employee and position. My advice would be to make one counteroffer putting your best foot forward, but negotiations should always be entered with an open mind.

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