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Auctioneer | accountingweb | Bidding war to retain staff
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What to do when staff are going, going, gone

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With employers increasingly getting sucked into bidding wars to retain staff, Philip Fisher considers the pros and cons of generous pay rises.

21st Aug 2023
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British employers are “increasingly making counteroffers to keep staff who are tempted by higher wages from rival firms”, according to a report published earlier this week by the Chartered Institute of Personnel and Development (CIPD). This survey of 2,000 employers carried out between 9 June and 5 July, as reported by Reuters, identifies an increasing trend that presents challenges for all sectors and in particular finance.

This was probably an inevitable development, given that the most common complaint from those running accountancy practices is the difficulty in recruiting and retaining high-quality staff.

Delving down into the detail, 40% of those surveyed indicated that they had made a counteroffer in an attempt to keep staff in the previous year. Of those, just over half said they were doing so more frequently than in the past.

Some of the underlying statistics seem strange since they show that 38% of employers were prepared to match the competing salary, while 40% went a step further offering to exceed it. Presumably, 22% made offers that were lower than the competitor, which is not a strategy that you would expect to achieve the desired result.

Effective strategies

Given the prevalence of this practice, in a finance and business market where keeping staff is vital to future success, it is worth reviewing alternative strategies to see what might be most effective.

If nothing else, being confronted with an employee handing in his or her notice, discovering that they have been offered, let us say, 25% more by a rival and then having to waste time discussing the situation with fellow partners, personnel staff and the disgruntled worker is highly undesirable.

Therefore, the first consideration should be getting salary levels right, and ensuring that you are offering generous terms to your most valued workers. Giving somebody 15% might sound like overkill when average pay in the sector, according to the latest Office for National Statistics (ONS) figures, is only going up by 9.4%.

However, if a pay rise at or below the rate of inflation leads directly to having to contact an employment agency or headhunter, the 15% could quickly seem a bargain.

Counteroffer policy

If that approach doesn’t appeal, then it is a good idea to have a firm policy regarding counteroffers.

Many accountants in the past would say that they never negotiated if an employee decided to leave. However, what they said and what they did when faced with the prospect of losing a prospective partner, and possibly even a number of clients who might follow, would not necessarily be the same.

We all know that the cost of recruiting a new member of staff and training them up is significantly higher than that of retaining a good worker, without even considering the risk that the new recruit doesn’t work out and you have to start all over again.

The other side of the coin is that buying an employee back is expensive and, if their colleagues learn that this is the best way to get a competitive pay rise, they may follow suit. This could leave you with an even bigger headache.

Matching an inflated pay offer can also backfire very quickly. Past experience suggests that, having looked at the market because they were disgruntled, even when persuaded to stick around by a hurriedly arranged pay hike, the feeling of being initially undervalued combined with other dissatisfaction frequently manifests itself soon afterwards, meaning that the employee underperforms and then moves on anyway. They might even share their beefs with colleagues, persuading them to look at pastures new.

Wave goodbye

For this reason and others, you could choose the opposite strategy – let your staff go and poach those working for rivals. That will almost certainly come at a premium cost, since changing jobs in a tight market is regarded by many as the best way to enhance their salaries.

Another option might be to offer more generous terms such as promotion, improving work/life balance – perhaps by offering greater opportunities to work from home – or maybe even risking the offer of a four-day week for five days’ pay (or a nine-day fortnight). The last sounds like a really bad idea but the right employee will respond and give you great value for money.

Ultimately, there is no right answer. While the employment market remains tight, employment costs will continue to rise at terrifying rates. In reality, it may be best to take this on the chin, keep your best employees happy almost regardless of cost and then do your damnedest to persuade clients to foot the bill.

Replies (7)

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By Hugo Fair
21st Aug 2023 23:25

Not sure that I agree with "Ultimately, there is no right answer."

Although only hinted at within the article, the right (and only) answer is to 'know your staff' - whether in large organisations this is formalised (as 360 reviews or development plans etc), or in smaller ones where a less stuffy collegiate style works better (family days and flexibility etc).

The point is that when someone hands in their notice you've already lost them ... it is merely the visible sign that they've reached a decision (often after much agonised self-questioning and/or discussion with partner).
Even if they swallow their pride and take your counter-offer, none of the factors that led to them even contemplating (let alone deciding on) resignation is likely to have gone away - and money doesn't cover all types of 'pain'.
And if belatedly you see the light and, as part of the counter-offer seek to identify/address their issues, then they're still left with the sense that you're only doing it because they forced your hand (aka you don't really respect them - which is one of the most powerful de/motivators known).

Personally I've never counter-offered (as I'm sure you've guessed) ... kicked myself for letting it get to that point, yes - but by then it's too late!

Thanks (14)
Replying to Hugo Fair:
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By bendybod
22nd Aug 2023 10:15

I've had it work out for the best once - the employee genuinely didn't want to leave and, three years later, she's still here.
Generally speaking though, if someone hands in their notice, I accept it and, as you say, kick myself.

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By RockyDog
22nd Aug 2023 11:05

"the most common complaint from those running accountancy practices is the difficulty in recruiting and retaining high-quality staff....", is this indicative of the reduced requirements for professional qualifications these days, for example, graduates with a relevant degree receiving a huge number of exemptions from ACCA, and calling themselves part qualified even if they have no experience whatsoever. unfortunately the entitlement culture we have now dictates that high salaries are demanded but many people aren't willing to put the effort in to justify them, resulting in a steady stream of low quality trainees coming through

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Replying to RockyDog:
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By AW95
23rd Aug 2023 13:29

RockyDog wrote:

unfortunately the entitlement culture we have now dictates that high salaries are demanded but many people aren't willing to put the effort in to justify them, resulting in a steady stream of low quality trainees coming through

Pay peanuts, get monkeys.

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Replying to AW95:
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By Hugo Fair
23rd Aug 2023 20:33

Pay deep-fried peanuts with caviar on the side, get fat entitled monkeys.

And your point is?

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Replying to Hugo Fair:
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By AW95
23rd Aug 2023 20:51

I wouldn't call £15k - £20k (if you're lucky) for a trainee "peanuts with caviar on the side". The better trainees will be able to get jobs paying more, so generally the only people who are going to go work in practice for [***] money are the ones who can't do any better.

Good people are always out there, just not for the money that small practices pay.

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By Avabailey
14th Sep 2023 11:18

Thanks for sharing. It's so interesting.

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