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According to a recent survey by Robert Half, top reasons for doing so included employees fitting in well with the company and team (60%), retaining knowledge within the company (59%) and additional costs related to hiring (57%).
Other reasons were related to talent shortage, team morale – 42% cited a smaller talent pool of skilled finance professionals, 21% felt employee turnover negatively affects team morale, while 14% said the cost to replace a specific skillset would be too high.
However, the survey also pointed out that despite the very valid reasons for doing so, counteroffers are rarely effective in retaining staff.
Almost six in 10 (59%) business leaders who have made a counteroffer indicate the employee ended up leaving the company, with 20% saying the staff member stayed less than a year, 22% citing the employee stayed for over a year, and 9% saying they stayed less than six months.
Yet, the survey pointed out that extending counteroffers appear to be common practice in Singaporean businesses with the overwhelming majority (96%) of Singaporean CFOs extend counteroffers.
One in three (30%) CFOs admitted to applying this practice ‘often’, more than four in 10 (42%) revealed that they do it ‘sometimes’ and 5% said they ‘always’ extend counteroffers. Only 18% said they ‘rarely’ make a counteroffer and merely 5% say they have ‘never’ extended one.
Matthieu Imbert-Bouchard, managing director at Robert Half Singapore, said: “Even though extending a counteroffer can be an immediate reaction to a top employee resigning, offering a financial incentive to remain with the company is just delaying the inevitable as oftentimes the reason why they want to leave the company goes beyond purely financial reasons. Even if the counteroffer is accepted, a higher salary does not always equal better performance and stronger loyalty. Employers would be better placed to withhold a counteroffer and immediately start the hiring process to replace them.”
Imbert-Bouchard suggested that employers should implement a blanket policy to not extend counteroffers to resigning employees, pointing out that counteroffers are neither effective, nor cost-saving.
“Not only are counteroffers ineffective in retaining employees for the long-term, they can also set a negative precedent for employers as it gives an indication to staff that threatening to resign is a successful way to receive a pay rise, while creating rumours of favouritism thereby undermining staff morale,” he explained.
Another suggestion Imbert-Bouchard has is for employers to take a proactive approach to their staff retention initiatives to avoid turnover.
“Knowing what drives staff members and taking appropriate measures, as well as regularly reviewing salaries should be key elements of any company’s staff retention policy,” he elaborated.
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