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Counter offers: Paying a premium to prevent departures

| By Hannah Gannage-Stewart | Reading Time: 3 minutes
Candidates seeking the ‘bargaining chip’ of an offer from elsewhere are playing a risky game, says Alastair Cleland

With talent scarcity driving up demand, little wonder many companies are prepared to pay big to stop staff leaving. Yet, candidates seeking the ‘bargaining chip’ of an offer from elsewhere are playing a risky game, says Pentasia managing director Alastair Cleland.

Losing staff is a huge cost for any organisation to bear. Staff departures are generally judged to cost businesses twice that employees annual salary, all considered.

Comparatively, a conciliatory pay rise to maintain the status quo presents exceptional value for money.

In igaming’s most talent-short specialist areas, the cost of lost staff is often even more significant and many businesses are fighting harder than ever to retain key staff.

Counter offers are increasingly prevalent in the highest demand talent areas: casino and gaming product specialists; experienced legal and compliance practitioners, and following Malta Gaming Authority’s regulatory changes; tech specialists, C++, Java, Python and other back-end particularly; and those with international business connections.

At Pentasia we now expect around 50% of all candidates to be counter-offered, and an even higher percentage of the most specialist and senior talent.

Yet, counter-offers usually only provide a temporary fix. Candidates who accept counter-offers generally return to the job market within the year, for the very same reasons they initially sought to leave: new challenge, growth opportunity, lifestyle change.

Money still talks when the offer is substantial, of course. In the past year we’ve regularly encountered counter offers up to +30% salary and even higher, plus offers including equity and additional benefits.

On the whole, though, it’s only employers who are prepared to substantially improve the job itself – rather than the salary – whose counter offers succeed long term.

Risks of playing the game
Candidates, aware of the ‘bargaining chip’ value of an offer from elsewhere, can see counter-offers as a fast-track to salary increases. In recent months we’ve seen how this can be a risky game for individuals, often with serious drawbacks that can outweigh the potential win.

First, hiring employers are increasingly cautious of applicants’ motives, and wary of those not wholly committed to moving. Those judged to be playing games will receive no offer and instead waste both their time and, in the longer term, their reputation.

Second, current employers are increasingly wise to counter offer tactics. A larger company’s response can be measured, with counter offers coming in under the competing employer’s package and, crucially, HR noting the disloyalty. Even in candidate-short markets, power rests with the big players.

Ultimately, it’s ambition on the candidate side and opportunity on the client side which creates a strong employer-employee relationship.
This match – rather than short-term salary increases – is where we recommend all employment negotiations to be focused for the best outcome all-round.

Key trends
• In 2018, reasons for leaving have generally centred on either: career growth; or lifestyle benefits like flexible hours or remote working. Employers who can provide both are far less susceptible to staff departures.  
• Big-name employers, particularly in tight markets like Malta, know that newer rivals will outbid them for talent. They rarely match these inflated offers though, aware of their value to staff in terms of additional employment benefits and long-term opportunity.
• Start-ups and smaller competitors find most success using job titles and responsibility to attract talent away from the big players. Titles like “director of…” and team leadership, combined with a healthy salary boost, are often difficult for large employers to match due to internal structures.
• Emotional attachment – far more than money motive – is the primary reason that candidates accept counter offers (or lack of willingness to leave in the first instance.) The power of loyalty, staff engagement and team unity cannot be underestimated.
• Genuinely active candidates, looking to move on from a successful company and role, regularly receive at least four of five offers of employment. Hirers should therefore consider not only the counter-offer, but also offers from competing employers, when considering their bid.

Alastair Cleland is managing director of Pentasia Recruitment Group, a specialist igaming recruitment agency. With 23 years’ experience managing large and multi-location agencies, Alastair has a track record of delivering hard-to-reach candidates for growing companies.

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