The Challenges of the Counter-Offer Culture

By Tom Leonard, Head of Technology Recruitment at Wallace Myers International

At this stage of Ireland’s continued economic turnaround we can almost regard it as a platitude that in certain sectors it is very much a Candidate’s market. The Technology sector arguably wasn’t as affected by the recession as others but certainly there wasn’t fantastic growth either. This has changed and we are now seeing significant and sustained growth across the sector. However, we now have a different sort of ‘crisis’: a lack of skilled candidates and the concomitant increase in salaries of those already in the market. We are now fully immersed in a Counter-Offer culture.

Counter-Offering is not a new phenomenon, it’s always been there. It goes against reason that a company would readily let a valuable and highly-skilled employee leave without seeing if there is anything they can do to retain them. It’s also equally understandable that if a highly skilled and experienced candidate is offered a role by one company, another company is also likely to want the candidate and is prepared to pay more.

Something has shifted though. Where once we could expect to see counter-offers in the region of say 10% of basic salary we are now fairly routinely seeing counter-offers in the range of 20-30%, sometimes more. It is becoming relatively normal for a candidate to be late into a process with one company, even at an offer or acceptance stage, and for another company to suddenly counter-offer well-over the candidate’s current offer and expectations. Is this just a temporary reaction to the market, a scramble to hire leading tech talent and stealing a march on the competition, or are there other factors which could see counter-offering and even ‘talent gazumping’ becoming a long term trend?

Within the tech sector salaries have always been fairly buoyant, however over the last 5 years or so they haven’t necessarily been on the increase. The UK and continental European markets have also become more competitive. Where once Ireland could boast some of the best tech salaries in Europe it is now on par and due to high living costs and relatively high taxation in Ireland it is now struggling to attract candidates from mainland Europe in the same numbers it once did. Companies increasingly need to offer far more to candidates in terms of salaries, benefits and relocation costs. Candidates have also become acutely aware of this. The number of emails and phone calls they receive from recruiters are on the rise and they are being courted directly by companies. It was only a matter of time that employees realised they were in a far stronger negotiating position than they have been in many years.

There are a few factors which will possibly mean this is a longer-term trend and it will be a sustained candidate’s market. Firstly, living costs are increasing. Average rents are at their highest level since 2008 and average house prices are not far off peak levels and although the overall tax burden will most likely be further reduced in the next few years it possibly won’t come soon enough to help prevent the upward spiral of salaries; secondly, there is obviously a supply and demand issue in terms of talent, quite simply there are not enough skilled engineers, developers and analysts to fill demand and although the number of IT graduates is on the rise we just aren’t seeing the numbers needed, and thirdly competition is greater, whether it be from the next leading US online company entering the market or from mainland Europe the Tech sector is experiencing a major boom.

So what can companies do, is there a solution or should companies just be prepared to break their budgets? Quite simply counter-offers will sometimes happen, no matter what a company does, and sometimes a candidate will receive a counter-offer that just cannot be matched. There is no quick fix to this trend. Understanding where else a candidate is interviewing, working with the recruiter (when relevant) to understand the candidate’s expectations, what they will accept and not accept and working with this, and being prepared to really sell your opportunity are all key.

For candidates this is a great time to be looking for new opportunities, especially if salary is a priority. There are downfalls though to just going for the highest offer and we would always encourage candidates to consider a few things when a company suddenly makes a major counter-offer. In the recruitment industry we are well aware of these considerations of why not to take a counter-offer but they are worth reiterating. If your current company is suddenly able to offer you a 20% salary increase, a promotion, a bigger bonus and the keys to the MD’s car, why has it taken the final step of handing in your notice for them to sit-up and take action to make you happy and keep you? If there were sufficient enough reasons for you to enter into the market, attend all those interviews, take that time out of your holidays and commit to a process is more money enough for you to forget everything else and stay? Perhaps it is, but chances are those other issues will reappear sooner or later.

And what if another company makes you an offer you cannot refuse? This is perhaps a clearer situation as chances are if you engaged in a process with another company you probably liked the company and the role, or at least aspects of them, so accepting an offer that is considerably better than anything else you have would be logical. However it is always worth asking the question, if a company is prepared to offer far higher than any other company you have engaged with is it that they just value your skills more than anyone else or is there something else about the role or the company that has meant that they have had to offer far higher salaries to attract people?

With salaries on the rise and counter-offers prevalent this is a challenging and competitive time for companies looking to attract Technology talent. More companies than ever are looking to commence operations in Dublin and with already established companies expanding the competition will only get fiercer. For candidates these are exciting times as career options and employers have not been as varied, interesting and plentiful for many a year. Salary will always be a major motivation, however making sure that the role, career opportunity and the employer remain the top priorities in the decision process will always make for the best long term choice.