37, Is giving retention offer to a resigned employee a good thing and what are the successful methods of retention offers as per research
Employee resignation is a regular activity in any organisation. Just as organisations experience excitement when a new employee joins, they also experience disruption when an employee resigns. A common question that arises in such situations is whether it makes sense to give a retention or counter offer to an employee who has already resigned.
Understanding Retention Offers
A retention offer is made when an organisation attempts to persuade a resigning employee to stay back. These offers usually arise after an employee receives an external offer and communicates their intent to leave. Organisations then evaluate whether retaining the employee is worth the effort and potential disruption to internal systems.
There are typically three types of retention offers organisations consider. One is matching the external offer. Another is making an aggressive offer that exceeds the external offer. The third is a comprehensive approach, where a moderate salary revision is combined with career discussions, growth opportunities, special projects, or development commitments.
Is It Appropriate to Make a Retention Offer?
Making a retention offer is not inherently wrong. Organisations naturally want to retain good performers. However, the decision must be taken carefully, keeping organisational systems and people processes in mind.
If an organisation frequently matches or exceeds external offers mid‑cycle, it sends a signal that salary revisions can be negotiated outside the formal appraisal process. Over time, this may lead to a culture where employees routinely seek external offers just to renegotiate compensation.
Business Impact as a Key Decision Factor
Another important consideration is business continuity. If the resigning employee is critical to ongoing deliveries, client commitments, or specialised work, their exit may significantly impact business outcomes.
In such cases, a retention offer may be justified as a short‑term decision to stabilise operations. The key question organisations should ask is how critical the individual is over the next six months, not necessarily in the long term.
Which Retention Offers Actually Work?
Research and organisational experience show that not all retention offers are equally effective. Matching an external offer has shown the lowest success rate, with many employees leaving shortly after accepting the counter offer.
More successful approaches include offering a slightly lower salary increase combined with meaningful career discussions, or making a significantly aggressive financial offer when the individual is truly critical. These approaches have demonstrated higher retention outcomes.
When Not to Give a Retention Offer
If the organisation can manage the employee’s exit without significant business disruption, or if retaining the employee would create internal inequity or morale issues, it may be better to let the employee move on.
Retention offers should never be automatic. They should be used selectively, with a clear understanding of business risk, cultural impact, and long‑term consequences.
Related Podcast Episode
This article is based on the transcript of the original podcast of the same name featured in India HR Guide.
The transcript has been translated into this article with the support of AI and a human‑in‑the‑loop process.
