The Great Salary Tug-of-War:
Why Counteroffers Can’t Win the Retention Game

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Throughout my career, I have been part of, and indeed instrumental in, the counteroffer tug-of-war.
Things at work aren’t great—you’ve stopped passing that skip-to-work test. It might be feeling stuck with no prospect of promotion, a poor relationship with your manager, or maybe even realising you’ve chosen the wrong company. In your heart, you know things haven’t been right for a while.

Eventually, you dust off your CV and send it out to several recruiters just to see what happens.

Suddenly, as recruiters start calling and putting you forward to other companies, life feels good again.

After a few rounds, you receive that job offer. It’s great! A good company, better salary, exciting prospects.
You prepare your letter of resignation and, of course, ponder the friends you’ve made and remember some of the great times you’ve shared.
Nervously, you hand your boss the letter.
The response surprises you. You’re told how highly you’re regarded, how you’re a fundamental part of the team, and you’re asked why you’re leaving.
It’s difficult not to mention the 20% salary increase you’ve been offered.

Often, this is met with the response: "I’m sure we can do something!"
“Don’t resign just yet. Let me chat with… HR, senior management, etc.”
Sure enough, that counteroffer comes. Maybe not the 20%, but a raise nonetheless. The promise to look at your role during the next promotion round, and a discussion—without commitment—about getting you some great development courses.
As you sit there, letter in hand, the thought of being the new person in another company hits you. The salary increase you’ve just been offered and the promises of better things to come win over, and you enter into the discussions, tear up your letter, and go back to work, happier with your ‘new’ job.

But, of course, it doesn’t end there. The reasons you wanted to leave in the first place are still there. You still have that boss you don’t really get along with. There’s no real commitment to those courses. But you are a little financially better off, though probably not as much as you would have been had you taken the other role.

Would it surprise you to know that this short-term fix could become a long-term issue?

80% of employees who accept counteroffers leave within 6 to 12 months, primarily because underlying reasons for dissatisfaction often remain unaddressed (SHRM, 2021). Counteroffers frequently function only as short-term incentives, not long-term solutions.

I had a friend who resigned from a company we both worked at. He was given a counteroffer, which he accepted. But within a month, he said he felt distrusted. Certain things were not shared with him.

Even after accepting a counteroffer, employees report reduced trust, lower engagement, and higher job dissatisfaction (CIPD, 2022).
Relationships with management or colleagues can deteriorate due to perceived disloyalty or resentment from others.

As I mentioned in the opening, financial motivations alone are not enough.
Employees typically resign for multiple reasons beyond compensation, such as limited career growth, poor management, burnout, or lack of recognition. Financial incentives rarely solve non-monetary grievances. Without addressing underlying issues, employees continue to seek better opportunities externally (Gallup, 2022).

Unless the employee has told no one (which is unlikely, as we all have at least one person we confide in), staying has a massive impact on team dynamics.
Other employees may feel undervalued if the organisation demonstrates that significant raises only come after resignation threats, potentially increasing turnover risk across teams (HBR, 2020).

The worst side of accepting the counteroffer is that staff ‘resign but stay’; there is a mindset shift.
Employees who actively consider leaving have psychologically already "checked out," which reduces their long-term attachment to the employer.
There are many recommendations that HR suggests to improve retention.

Of course, salary is important, but we all know that another company will pay for experience gained with the current company. Maybe your network and contacts have real value to them. However, regular market benchmarking of salaries prevents the knee-jerk counteroffer, as employees will know their salary is in line with others.
Regular discussions about individuals’ aspirations, their career path, workload, recognition, etc., prevent the out-of-the-blue resignation.
If you do find yourself in the position to make a counteroffer, combine salary adjustments with changes addressing the employee’s original concerns (career growth opportunities, workload balance, flexibility, improved management practices). Open discussions about expectations and long-term plans can genuinely reconnect employees with company goals.

Conclusion:
Counteroffers focusing solely on salary increases are often a temporary retention tool, as they fail to address the core drivers of employee dissatisfaction. Companies seeing low retention within a year post-counteroffer should reassess their approach to employee engagement, career management, and broader workplace culture.
And if you were worth the raise in salary to your employer, why didn’t they pay you that in the first place.

References:
• SHRM (2021). Counteroffers: Temporary Fixes for Deeper Issues. Society for Human Resource Management.
• CIPD (2022). Employee Turnover and Retention. Chartered Institute of Personnel and Development.
• Gallup (2022). State of the Global Workplace Report.
• Harvard Business Review (2020). The Hidden Costs of Counteroffers.