Should You Make a Counteroffer When an Employee Resigns?

When an employee resigns, should you counteroffer? Decision criteria, how to design an offer that fixes the real cause, a conversation script and the system fix.

Thursday afternoon, your best team member asks for a word and hands in their resignation. The first question managers and HR ask is whether to make a counteroffer. The short answer: in many cases, no. And when it might be right, several things still need weighing first. The common mistake is seeing counteroffers as a retention tool, when often they are an expensive way to buy time.

What a counteroffer is, and why it often fails

A counteroffer is what a company offers an employee who is about to leave, to persuade them to stay. Usually it is a raise, sometimes a new title or scope. The problem is that the reasons people start job hunting are rarely just money. Their relationship with their manager, growth opportunities and boredom with the work do not disappear after one pay rise. If the cause remains, the resignation is only postponed.

A bigger effect is the signal it sends to the team. If an organisation uses counteroffers often, people learn that the way to get a raise is to bring in an outside offer. The pay structure starts losing fairness, and people who never threaten to leave feel taken advantage of.

When to consider one, and when not to

Cases where it may be worth it

• The person holds specialised knowledge nobody can take over yet, and replacing them would take a long time.
• They are in the middle of a critical project that would immediately hit customers or revenue if they left.
• The reason for leaving is clear and genuinely fixable within the budget and time available, such as expanding a role the organisation needs anyway.

Cases where you should not, however painful

• The cause is their relationship with their manager and the reporting line cannot change.
• They asked for a raise several times and were refused, and only get one now that they hold an offer.
• They have mentally accepted the new job and would only take the counteroffer out of politeness.

Before deciding, check whether you ran a stay interview with them in the past year. If not, a counteroffer is not the answer: fixing the system is. Read how to run a stay interview that gets real information.

Talk before you offer: a 3-question script

Before talking numbers, listen for the real reason. Try asking:

1. Thank you for telling me directly. I would like to understand what made you start looking.
2. Looking back, is there anything the company or I could have done better?
3. Apart from money, what does the new place offer that we do not?

If most answers are not about money, offering more money alone will not work.

The best counteroffer is saying thank you for your hard work, here is how we are adjusting your package this year, six months earlier, not when they are holding a resignation letter.

A counteroffer structure that limits the damage

If you decide to make one, do not match the other offer point for point, because it turns into an auction. Design a package that addresses the real cause.

1. Adjust pay based on market data, not the number in the other offer. See how to do compensation benchmarking.
2. Reshape the role toward the direction they want to grow, not the same job at a higher price.
3. Agree clear goals and a timeframe for promotion or a stretch project, and put it in writing.
4. Change the reporting line if the manager is the cause and it is genuinely possible.

After the conversation, follow up closely in the first quarter. If the original cause persists, start planning knowledge transfer, because a postponed resignation often comes at an even worse moment.

Look beyond the individual case

A counteroffer can save a key person at a critical moment in some cases, but if you need them often, your retention system has a problem. The long-term fix is to revisit pay structure, career paths, manager development and employee experience. Read why top talent leaves and a system-wide approach to reducing attrition.

Where to start

1. Set criteria in advance for when the organisation will counteroffer and who approves it.
2. Run stay interviews with key people every year.
3. Review pay against the market proactively, without waiting for resignations.
4. Record the reason for every resignation and review trends each quarter.

For employees wondering whether to accept a counteroffer, talk to someone experienced through the Mentors page, or browse career planning courses in partner courses to see the full picture before deciding.