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I have recently become the new manager of a team because the old manager left the company.

I found out that one of my team members was going to leave 5 months earlier, but was counter-offered successfully by the old manager. There was a handshake agreement to increase the team member's salary by 50% if they would stay for one year.

That employee is now submitting their notice to leave, claiming that they have an offer for 40% more than what they're making now (even with the counter offer). What should be done about this employee who we've already countered once?

Telastyn
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mark bucp
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    So your company gave him a 50% raise, and he got a 40% raise on top of that at another company? It sounds like your company doesn't pay enough for your market. – Tyanna Sep 16 '14 at 19:02
  • Yes after 5 months – mark bucp Sep 16 '14 at 19:02
  • @markbucp - I've tried to clean up the question's formatting. Please correct anything if I misunderstood the content. – Telastyn Sep 16 '14 at 19:16
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    Nothing. You paid that employee more, which kept him around for an additional 5 months. He is now being offered even more money and is leaving. That's fine. If you had kept him around by paying him a lump sum (bonus) with a stipulation of something like "acceptance of this requires an additional 2 years. If you leave early you will be required to pay it back on a time pro-rated basis" then you still couldn't FORCE him to stay, you'd just get part of your bonus returned. Since you didn't do that you are paying him more $ by paycheck, so he owes you nothing. – CGCampbell Sep 16 '14 at 19:39
  • Of course, my comment above is predicated on you not wanting to match his new offer. If this is a really needed (essential) employee, then you may well want to counter-counter. However, as @Tyanna said in her (his?) comment, a 90% bump in salary means it was extremely likely either your company isn't keeping up with the market or they were taking advantage of that employee. (On a personal note, in 2000, I left the military, doubled my pay, then found out in order to make market rate, I had to double it again, which meant I was taken advantage of) – CGCampbell Sep 16 '14 at 19:50
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    The other possibility is that he is gaming you and doesn't have a real offer for that amount. Lots of places pay low, but generally they don't pay 90% below market. – HLGEM Sep 16 '14 at 19:59
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    @HLGEM It could be gaming the system, but they did agree to a 50% raise already, that's a pretty bad sign he was being under paid... – Eric J Fisher Sep 16 '14 at 20:28
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    the place is not paying 90% below market - he was on 100 before, now he is on (50% raise) 150. He gets a 40% raise on this, so he is now on 210. He was on 100 before, so the company OP works for is actually paying 53% below market rate. – bharal Sep 16 '14 at 22:04
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    Most people don't leave strictly because of pay. However, being ~50% underpaid is quite a lot. It is so much that there are probably hard feelings on the part of the employee. I guess the only thing to do is to learn the lesson: Don't underpay people. – teego1967 Sep 16 '14 at 23:38
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    Do you want to keep him or not? –  Sep 17 '14 at 05:05
  • Whatever you do now, don't hire him back when he tries to return in 6 months to a year....unlike what my management did. (Spoiler, he left again a year after that.) – user3067860 May 25 '17 at 20:41
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    was this 50% rise going to take effect after a year? if so the employee opted for Jam today rather than relay on the word of a now absent manager that might not be honoured – Neuromancer Dec 12 '17 at 22:56

4 Answers4

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What can do you do?

You could pursue this legally as it might qualify as a verbal contract in your area, but that'd almost certainly be a terrible idea...

You could offer another counter raise, but that's probably a bad idea since this will likely just happen again.

You could just let them go and try to prevent losing more people in this manner.

What should you do?

Before anything else decide Should you attempt to retain this person? In under a year they've taken a 50% raise with a promise to stick around and are now leaving for more money. Sounds to me like this person is going to pursue anything with a bigger dollar sign so probably best to just cut your losses and let them go.

You need to review your wages compared to the market... a 50% raise is HUGE and is a big red flag you're way off base on your pay rate compared to the market... now throw an extra 40% on top of that is a 110% raise!!! is there a flag more alarming than red? if so this would qualify...

Prevent the hemorrhaging

So at this point someone in your staff is leaving for 110% their salary as of last year. Clearly this person was important to you or you would not have offered a 50% raise the last time.

If you're lucky this person will keep quiet and word won't get around, if you're unlucky people will hear about this whole situation and think. "How much could I make if I flipped jobs?" Some will this will stop there, the danger is if you are not offering competitive wages this could be the start of losing ALOT of people very quickly.

At this point you need to assess your situation. Where do you stand in regards to your wages compared to others in your market? are you above average, about average, or below average? If your company was willing to offer a 50% raise to retain him it's almost certainly you're below average.

Likely you'll need to assess what amount of turn over is acceptable to you and what is unacceptable. If you fall into unacceptable your only reliable way to improve it is offer better wages and benefits.

Eric J Fisher
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  • @JanDoggen I agree completely that if it were me I'd have zero interest in retaining this person, but to be fair if I was the employee in question I'd probably burn a bridge for a 40% raise... (I'm also slightly jaded from working for a few lousy companies when I was younger) – Eric J Fisher Sep 18 '14 at 17:17
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What should be done about this employee who we've already countered once?

People generally don't leave jobs only because of money (though in your specific case, there might be an exception). Location, benefits, work environment, work content, people, etc, all affect this too.

When you offer someone more money, you only remove the "reasons I want to leave" if the only driving factor is money. Generally this isn't the case. And sometimes, even if it is, it can breed discontentment if the employee thinks "wow, they were underpaying me by X and only offered it when I quit!"

This person is incredibly unlikely to stick around in the future. Trying to quit twice in 5 months is not a good sign they will stick around.

Oh, and it's entirely possible the employee realized they are valuable and wants to be paid more now rather than later. Or is making this all up, realizing you guys offered ridiculous "stay please!" packages and might want more.

Regardless of which of the above it is, it's not in your best interests to keep the employee.

How to make sense of "holy wow you underpay!"

People are taking offense to the "yeah but he's still underpaid!"

There are a ton of factors which can affect this. Let's consider the following example. The employees work for a small company and are software engineers and the OP is making $60k/year. According to glassdoor, this is right around the low end of software engineer salaries in the United States (it goes from 61k - 115k). For some startups this might not be unreasonable and for many it's probably high. Often in startups you won't get a raise without asking, either.

The employee now also has some experience after a few years and is likely making the same $60k starting. Perhaps the company is making more money now and the employee has proven their value. After this the company offers the employee $90k to stick around.

Now, the employee is realizing their value and skills and starts applying to a few larger companies for senior level positions and gets offered $115k/year. Maybe they applied to Google, this seems pretty reasonable as their average salary is about that.

The employee now has a job offer which is nearly double their current $60k salary. Are they completely underpaid at their startup in this example?

Of course, it's also possible the company is paying $40k, too, and they are getting screwed. But jumping to this conclusion is not necessarily the only possibility.

Community
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enderland
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    People generally don't leave jobs only because of money is a disingenuous statement for this case until we know the facts about the market rate. If the employee was, in fact, being paid 66% (or < 50%) of market, there are very very few people who would not leave, solely for the money. – daaxix Sep 17 '14 at 05:56
  • I would agree to this answer but getting a 50% raise then an additional 40%... That's some serious cash flow shifts. – Eric J Fisher Sep 18 '14 at 14:00
  • Perhaps the employee in question is working for a start-up and has significant stock options but lower salary. Or maybe the benefits at the company are way above average. Who knows. Maybe the OP works for a startup or government agency and this employee went to a megacorp bank. Frankly, large salary differences between those employees are really common. If the differences are 50k vs 70k salary it means someone is only making 70% of market rate. In this example it's 53%, which while more significant could be entirely possible. I will add details to explain this. – enderland Sep 18 '14 at 14:54
  • @RualStorge I have added an edit addressing this. People keep jumping to immediate conclusions on the "underpaid" element which may or may not be true. – enderland Sep 18 '14 at 15:07
  • CC @daaxix as it applies to both of your comments – enderland Sep 18 '14 at 15:07
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It's up to you what you want to do next.

  1. You can choose not to counter, in which case you lose the employee. On the other hand, the employee does not get the 50% raise.

  2. You can choose to counter, in which case you might keep the employee, at least until the employee gets another offer down the line. Just be cognizant that as word of this employee's pay raise gets around, you will have to deal with rising dissatisfaction from other employees.

Choose your poison.

Vietnhi Phuvan
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    Someone who has done this twice in less than 6 months is generally not someone you want to keep. He will just keep threatening to leave for pay raises. I would accept his resignation with no counter. I would plan to pay more to the next hire though. – HLGEM Sep 16 '14 at 19:58
  • @HLGEM what the market average should really be reviewed at this point. It's likely one if not both parties are way off. – Eric J Fisher Sep 16 '14 at 20:30
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I honestly don't think there is much you can do about this employee in this case.

As it was a hand-shake verbal agreement, trying to go after him legally could be difficult and might not turn out in favour of your company. Even if it did, if what would that say about your company to your current staff?

Also, this person has found a new job even with the salary bump. This means that money isn't the only reason they are leaving. Throwing more money at the problem might work for a short time, but it will not be a long term solution.

Let's say for a second you decide this person is a vital member of your team so your company counter offers with an additional 42% to out bid the other company. This time around it put in writing that this person must stay for at least a year. Do you think they will be happy in that year? Do you think you will be getting your money's worth? People who hate their jobs are not productive. Period. Contractually making them stay is a toxic work environment.

I stated in my comment above, if this person has received a 90% pay bump in the last 6 months, your company probably isn't paying it's talent at market average salary. That is something that needs to be addressed b/c once others start to hear about the green grass out there, you might start to see more people handing in resignation letters.

Tyanna
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