Employers are offering pay rises to keep top talent within their workforces, research by the Chartered Institute for Personnel and Development (CIPD) has revealed.
The HR and people development body’s survey of 2,000 UK organisations, which explored their pay, hiring and redundancy plans, discovered that two in five (40%) had made counteroffers in the past 12 months to keep key employees.
A similar percentage (38%) were prepared to match the salaries of new jobs, while 40% offered higher rates of pay, the CIPD’s latest Labour Market Outlook found.
One in four (25%) of organisations that have previously used counteroffers said they expect to do so even more in the next year than in the past 12 months, while just 8% expect to make fewer.
The research, which is carried out quarterly, further revealed that they were most common in London, where 58% of employers had made them in the past 12 months.
Respondents also said in the next 12 months they anticipate basic pay rises to remain at 5%, the same as it has been in the last two quarters.
In terms of formal policies, just over one in five (22%) that make counteroffers have these, prompting the CIPD to warn that a lack of these processes could lead to issues relating to pay gaps, pay fairness and the organisation’s overall approach to reward. It is urging employers to implement a clear counteroffers policy, “as part of a fair and transparent reward and recognition strategy that looks beyond pay”.
The study further found that among employers that are using counteroffers to retain staff, more than half (51%) have increased their level in the past 12 months, while 45% think counteroffers are effective in keeping staff for 12 months or longer. However, nearly three in 10 (29%) believe they are not effective.
According to the CIPD, this indicates counteroffers may only be valuable as a short-term option for some organisations, and that employees will move if other parts of their job – for example, workload, autonomy and environment – do not meet their expectations.
Jon Boys, senior labour market economist for the CIPD, said: “The fact that counteroffers are so widespread suggests they do have a role in matching people and jobs. Employers need to approach them with caution though and have clear internal processes for when these situations arise. Counteroffers may help to retain key staff and avoid knowledge drains and the cost to hire new people, but this must be weighed up against other considerations. For instance, counteroffers could exacerbate pay gaps, cause equal pay challenges, or result in a drop in employee engagement. They may also only work for the short-term.
“While pay is often the most typical focus of a counteroffer, there are other things employers should consider in making roles more attractive, such as flexible working, additional paid holiday, opportunities for career development, or better pension contributions.”