17 August 2023

To tempt workers to stay, 38% of employers who made offers matched the salary of the new job offer, and 40% offered even higher sums according to the latest Labour Market Outlook from the Chartered Institute of Personnel and Development (CIPD).

The quarterly survey of 2000 UK employers’ hiring, pay and redundancy intentions found that 40% have made a counter-offer in the past 12 months with the highest number (58%) being in London.

The CIPD said the survey shows that employers continue to face pressure to pay higher wages to compete in the labour market. Employers expect basic pay increases to remain at 5% for the next 12 months, unchanged from the last two quarters, and counter-offers are regularly being made to keep key staff.

However, the survey found that just 22% of employers that make such offers have a formal policy on them, for example explaining in which circumstances they can be made.

The CIPD is warning that a lack of a formal process could result in issues relating to pay gaps, pay fairness across similar roles and the organisation's overall approach to reward.

Its senior labour market economist, Jon Boys, said: “The fact that counter-offers 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. Counter-offers 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 example, he went on, they 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.

Employers should consider factors other than pay that could make roles more attractive, he concluded, such as flexible working, additional paid holiday, opportunities for career development or better pension contributions.

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