Counter-offers – pay rises proposed by desperate bosses to employees who announce they are resigning for a new job – are now a feature of the whole UK job market.
According to specialist recruiter Randstad, counter-offers, traditionally the preserve of the City’s merchant bankers, are offered to approximately one in every five bankers threatening to resign in a typical year in the middle of the economic cycle. But these rates are now being matched in roles in the professions. A fifth (19%) of professionals working in Finance, Law, Tech & IT, Construction & Engineering industries are now counter-offered.
When asked if they had been counter-offered when they last moved jobs, more than a fifth of Tech and IT professionals reported they had been (21%) as did a fifth of Construction & Engineering professionals (21%), and more than a sixth of legal professionals (18%). Across the UK as a whole, 8% of people who tell their boss they are leaving for a new job are offered a pay rise to stay.
Mark Bull, CEO of Randstad UK, said: “While counter-offers have been common in investment banking for decades, they have never been a very distinct feature of the jobs market in other industries. Traditionally the unwritten rule was professionals in engineers, accountants and IT were counter-offered only very rarely. But now counter-offers are becoming part of the job hunting landscape across the country. This is not just about the economic cycle – currently about three quarters of construction and finance workers are being counter-offered – this is far bigger than a short-term candidate driven market. This represents a cultural shift in the way organisations see talent and the way they respond to people potentially walking out of the door.”
Not just a London phenomenon
While a fifth of London’s workers said they were countered-offered when they last changed jobs (20%), a sixth of employees working in financial powerhouse Leeds report being counter-offered; and 10% of people working in tech-hub Bristol say the same.
Mark Bull said: “As the increased importance of human capital and the scarcity of high flyers has dawned on organisations across the country, there has been a profound change in employers’ willingness to fight to retain their A-Players. Engineering behemoths, IT firms, and accountancy firms have all woken up to the need to look after their highflyers as well as the need to poach top quartile performers from the opposition to plug their skills shortages. Not only are they desperate to recruit, they are prepared to scrap to hold onto the right people. The end result is counter-offers have increased in both their frequency and their scale.”
Age and gender impacts counter-offers
Workers in the 18-24 age bracket are rarely counter-offered (>1%) and the same goes for workers at the other end of their career with only one in 17 (6%) of those over 55 reporting they were counter-offered – and just one in 25 (4%) of those between 45-54 saying the same. But it was a different story when Randstad asked those in the 25-44 age bracket. One in seven (14%) said they were counter-offered.
Women are also less likely to be counter-offered than men – 9% of men were counter-offered when they last moved jobs compared to 7% of women.
Mark Bull said: “The supply of managerial talent is limited. The number of twenty five to forty four year olds – the demographic segment that will supply companies with their future leaders – is declining as a percentage of the population. That’s reflected in the increased prevalence of counter-offers being made to that age group.
“The discrepancy between the sexes is more disturbing as it’s a much more subtle form of sexism than simply hiring more men than women. The fact that employers seem keener to keen hold onto men than women is worrying – that sort of thing should have died out in the fifties. Let us hope this is not the case in professional sectors such as accountancy and engineering – two industries where gender sits at the heart of the blue-chip employers’ hiring processes.”
Counter-offers are expensive – and they don't necessarily work
The average pay increase that an employee would need to turn down a new job offer is 18% of their existing salary – the equivalent of £5,900 now that the average wage stands at £33,500 .
Engineers and accountants demand slightly less than average (15% and 16%) while Tech & IT professionals say they’d want 18%. With the mean average salary of a fulltime IT and Telecoms Director now approaching £87,000 , a successful counter-offer means paying more than £102,000 per year. And now that production managers and directors in construction earn more than £52,000 a year on average, bosses would need to offer them an extra £7,800 a year to retain their services.
Despite the sums involved, 37% of employees said that even if they decided to accept a counter-offer rather than a new job, they would still plan to move elsewhere within a year. Counter-offers are particularly ineffective in Construction & Engineering and IT: more than half of professionals working in Construction & Engineering (52%) said they’d stay for less than a year with an even higher proportion in Tech & IT (55%) saying the same.
Mark Bull said: “From an employer’s point of view, counter offers are more trouble than they are worth. They’re a short-term solution to a long-term problem – the equivalent of sticking a plaster on a dirty wound – as they simply delay the exit of someone who has already decided to leave an organisation. They are often made by employers who don’t understand what really motivates their employees and even when they work, it’s generally only a stop-gap measure. As an employer, you’d be much better off taking a long hard look at your employer value proposition and making sure you have a compelling answer to the question, ‘Why would a highly talented person choose to work here?’ Throwing money at someone who isn’t committed to your organisation is an expensive way to keep a full workforce; better to invest that money in making the company an attractive place to work.”
Even employees admit that counter-offers may not necessarily be a good thing. Three-fifths (59%) of employees thought that counter-offers represented “too little, too late”. And when asked if they thought counter-offers were an effective retention tool, 58% of employees across the UK said they were not.
Mark Bull said: "A counter-offer is effectively a belated admission from your employer that you have been unfairly underpaid for a number of years, even if you can forgive your boss that, it’s not always in your interests to accept one. By telling your boss you were resigning, you have, effectively, sacked him – at the very best, you will be regarded as less loyal. That’s Quite apart from the fact that there’s a bigger reason involved than just cash when you decide to hunt for a new job – and that won’t have changed.”