Robert Half Survey Finds Counteroffers are not working in Australia

• 94% of Australian CFOs have made a counteroffer to employees in a bid to retain them.
• 66% have made a counteroffer to an employee who ended up leaving the company.
• 68% say the main reason for providing a counteroffer is to avoid hiring costs for a replacement, 60% refer to a desire to keep knowledge within the company, and 40% cite a smaller talent pool of candidates.

While counteroffers are common practice for Australian companies, they are generally ineffective in today’s competitive employment market. According to independent research commissioned by specialised recruiter Robert Half, more than nine in 10 (94%) Australian CFOs have extended a counteroffer while 66% of the same CFOs also say that the employee ended up leaving the company.

Extending counteroffers appear to be common practice in Australian businesses with more than one-third (34%) of Australian CFOs ‘always’ making a counteroffer to their finance employees in a bid to retain them. A quarter (25%) apply this practice ‘often’ and 26% ‘sometimes’. Almost one in 10 (9%) say they ‘rarely’ make a counteroffer and merely 6% say they have ‘never’ extended one.

However, acknowledging the ineffectiveness of counteroffers, two-thirds (66%) of the business leaders who have made a counteroffer say their employee ended up leaving the company, with 37% saying the staff member left within six months, 20% saying the employee stayed for less than a year and merely 9% cite he/she stayed over a year.

David Jones, Senior Managing Director at Robert Half Asia Pacific said: “Counteroffers are often an immediate reaction to a skilled employee resigning, however offering a purely financial incentive to remain with the company rarely works. It can be a very costly way to delay the inevitable”

“With the war for talent and companies actively poaching top employees from competing organisations, business leaders need to proactively address their staff retention measures and not wait until one of their top performers wants to leave the organisation. It’s too late then. Managers need to check in frequently with their employees to make sure they’re challenged and satisfied with their career path, as well as regularly assess salaries to ensure compensation is fair.”

The costs related to replacing an employee, including onboarding and professional development are a key driver for 68% of CFOs who have made a counteroffer. Six in 10 (60%) cite the desire to retain knowledge within the company as one of the main reasons for making a counteroffer, while 40% point to a shortage of skilled finance professionals.

“Counteroffers set a precedent within any business, undermining trust and morale in the long term. Business leaders will send a message to staff that, unless they threaten to resign, their pay rise request won’t be considered. Some may even look around at other jobs merely to be able to renegotiate their employment terms. So while staff retention is the key driver for extending a counteroffer, it might actually have the complete opposite effect within the wider business.” 

“While hiring and onboarding a new employee comes with additional costs, offering a higher salary as a counteroffer does not always translate into better performance. When employees feel they are ‘indispensable’ in a company, it is possible they have little motivation to work harder. What’s more, there is a risk they will become less efficient, gradually becoming a strain on the company at hand.” 

“If companies are confronted with the sudden departure of a skilled staff member, the use of interim managers and temporary employees is a way to ensure business continuity until a permanent replacement is found,”concluded David Jones.

Australian CFOs were asked: “What are the main reasons for making a counteroffer?”

Source: Independent survey commissioned by Robert Half among 151 Australian CFOs – multiple answers allowed.