Company's change retention policies by counter offers to leaving employees

Employee retention has improved over the last six months. And how! While companies would like to believe their policies around employee engagement and other best practices in HR are helping them retain employees, it's really counteroffers that are doing the trick.

More candidates are learnt to be responding positively to counter-offers by their existing organizations. This has certainly left hiring agencies high and dry as they bring candidates to recruiters but a growing number of these candidates end up biting the counteroffer bait. Hiring agencies say in the last six months, the number of people accepting counter-offers has almost doubled.

Hussain Tinwala, assistant VP (permanent staffing), TeamLease, said, "Normally, the percentage of candidates who decline a job proposal following a counter-offer from their current organization is 12-15%. In the last 6 months, this percentage has jumped to 20-25% on an average. The actual numbers vary from industry to industry. But the trend of more employees taking the counter-offer from their organizations appears to be growing."

Employees being given a counter-offer feel valued and are motivated to stay back. When a new job offer is made to a good candidate, the proposed salary is 20-25% higher than the person's current pay package. Annual increments, on the other hand, are 12-14% for a good candidate. In a counter-offer, the job offer is matched or is even higher by 5% compared to what is proposed in the offer letter.

There are multiple factors fuelling the trend. One is to do with the millennials who are passionate about their jobs but look for upward mobility every two years. "It's difficult to keep millennials contented with a routine profile beyond two years. Companies retain them with counter-offers along with added responsibilities to support business continuity because it's a marathon task to seek replacements — the selection criteria are based on the competencies of the outgoing employee.

With expectations going up, there is an increase in the cost of hire and the compensation level. It usually takes six months for a fresh person to settle down in a new role and an additional six months for the return on investment," said Tinwala.

Mayank Chandra, managing partner, Antal International, said one of the reasons for the rise in counteroffers in the last few months is the expansion in the economy. "There is a war for talent in every organization, big or small. The last thing they want is to lose out on good talent as hiring and training new people requires time and money," he said.

With India fast becoming an important market from a global perspective, Chandra said global organizations are also keen on retaining talent via counter-offers. An official from a mid-sized company in the automation space said in the last one year, the job offer decline rate by candidates selected to join the company was about 10%. The main cause for this were counter-offers made by the candidates' existing organizations. They either matched the offer or made a higher offer, said the official, who did not wish to be named.

"The trend is rising because of a change in behaviour of people who come for an interview to collect offer letters only to use these as a bargaining instrument," the official said.

Some organizations do not encourage counter-offers, because a large number of people who accept them quit in 12-18 months. Bijender Vats, director (HR), MSD Pharmaceuticals, said, "We try to retain high-potential employees by offering them stretch assignments or cross-functional projects which enhance their learning, encouraging them to stay engaged.

Source: techgig.com