Employers are using Counteroffers to retain their key talent without any formal policy but Effectiveness is Short term

💡 Employers use "Counteroffers" - a retention tool - to keep organizational knowledge and technical skills but they are using counteroffers at a greater rate than before. Majority of companies have not any formal retention policy, for example explaining in what circumstances a counteroffer can be made to an employee. 40% of UK employers have made a counteroffer in the past 12 months with London is the counteroffer capital of the UK, with 58% of employers based here making counteroffers in the past 12 months. But counteroffers are seen by employers as more effective than ineffective in retaining employees for 12 months or more - this tool is relatively effective in the short term, according to a new interesting research published by CIPD and in partnership with YouGov Plc. using a data from 2,003 senior HR professionals and decision-makers in the UK between 9 June and 5 July 2023.

✅Counteroffer is a retention tool mainly for salary increase but not only...

A counteroffer is where an organization attempts to retain an employee after they have been provided an offer of employment from another employer. Often organizations will offer an improvement to the current salary of an employee in response.

👉 But can also take other actions, such as offering more flexible working or providing the employee with a company car, as part of their counteroffer

✅Counteroffers are commonplace among employers

Researchers found that two-thirds of UK organizations give counteroffers, one in five employers don’t, and a further 16% of employers are unsure if they do.

✅Large private sector employers are most likely to use counteroffers

Researchers noted that the private sector has used this as a mechanism to retain employees (43%) more than the public (34%) and voluntary (20%) sectors. 

✅Employers are using counteroffers at a greater rate than before

Researchers observed that among employers giving counteroffers in the last 12 months, half (51%) have offered a higher number than before, with 40% offering the same level of counteroffers and only 9% offering fewer than previously.

✅Organizations expect to offer more counteroffers in the coming 12 months

Researchers predict that larger private sector businesses expect to increase the number of counteroffers in the next 12 months (37%) at a much higher rate than SMEs (12%) in a bid to retain employees.

✅Counteroffers used to keep organizational knowledge and technical skills

Researchers found that private sector employers give counteroffers to retain talents employees due to :

✔️ Their organizational knowledge

✔️ Technical skills

✔️ Their good client relationships 

✔️ Difficulty in finding a replacement

✔️ Avoid recruitment costs of replacement

✔️ Avoid onboarding and training costs of replacement

✔️ Maintain or improve team morale

✔️ Avoid disruption or project delays

✔️ Ensure they don't join a competitor

✅Lack of formal Retention Policy in majority of companies

Researchers noticed that one in five employers who have used counteroffers in the past 12 months or plan to in the next 12 months have a formal policy regarding them, for example explaining in what circumstances a counteroffer can be made. Half as many (11%) don't have one but are in the process of creating one or plan to do so in the future.

👉 59% of organizations don't have any formal policies and don't plan to.

✅Salary offers in the top of counteroffers

Researchers found that money talks when it comes to counteroffers and 40% of employers who have used counteroffers or plan to in the next 12 months are exceeding offers given by other employers. 

✅Effectiveness of counteroffers valuable in short term

Researchers found counteroffers are seen by employers as more effective than ineffective in retaining employees for 12 months or more. 45% believe it is effective, compared with 29% of employers who believe it is ineffective.

☝️ This shows the practice may only be valuable as a short-term option and that employees will move if the wider package (eg workload, autonomy, environment) doesn't meet their expectations.

Thank you 🙏 CIPD  researchers team for these insightful findings: 

James Cockett Peter Cheese

Dave Ulrich George Kemish LLM MCMI MIC MIoL

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