How to handle a surprising counter offer

Question

I have recently been in the job market (I work in software development), and have been offered a new position with a 50% pay increase. I have been at my current organization for 5 years, and have been an employee since the company was founded. My new role would be at a much larger organization.

My reasons for leaving are:

• Boredom
• Career progression
• A desire to broaden my horizons and try something new
• Dissatisfaction with leadership style and direction (though I have no personal issues with anyone at my current organization)
• Broken promises (more on that in a moment)

Upon handing in my resignation, within 15 mins the directors came back and instantly matched the salary I had been offered elsewhere (albeit making the difference up as a 'guaranteed' annual bonus). They also offered me significant equity in the company, with an indication that they will be looking to sell the company in the coming years.

This has caught my attention, primarily because I was not expecting them to match the 50% pay increase, and also because the promise of equity has been made to me on a number of occasions in the past, but I am still waiting to see the paperwork after nearly 3 years.

Everything here seems too good to be true; I have read all the usual stories about why counter offers are bad, but in this instance I'm getting my new salary matched, and on the face of it an opportunity to earn a life changing sum of money in the not too distant future.

Does any of this ring alarm bells for anyone?

Answer 1

When my friend was leaving their job for another, and asked me the same question, it was very simple to answer - for me and for them.

If money wasn't an issue, would you stay at your current job, or take the new job? Are you leaving because of money, or are you leaving for any other reason?

For my friend the answer was "no" - they would take the new job, because of reasons that won't change even with a counteroffer.

From your list of reasons to change, none of those are money. So - are they all excuses for leaving for more money? Or are those reasons the real reasons, and the money isn't as important?

Answer 2

Does any of this ring alarm bells for anyone?

Yes. Very much so. Your leadership is not behaving in a "ethical" manner.

1. They darn well knew that you were severely underpaid, otherwise they wouldn't have counter offered that quickly.
2. "guaranteed" bonus is NOT the same as base salary. Guarantees can be revoked and bonuses rules can change, maybe not this year, but who knows about next year
3. Equity offer will require very careful evaluation. Could be real but could also be a smoke scree and given the past behavior "smoke screen" is the more likely scenarios

These people have screwed you over before. Why would you trust them now? The counter offer is not even as good as your new offer and the equity offer is questionable and would require serious research and assessment.

Answer 3

How is this even a question?

You're leaving because the company has broken promises with you, and right now they're... offering a bunch of promises.

"Oh, we'll totally give you a bonus later this year! Oh, we'll totally give you stock options! Oh, we'll totally sell the company soon and make you rich!"

Notice something? They're not actually doing anything. They didn't give you a raise. They didn't hand you money. They didn't actually give you stock options. All they did was promise stuff in the future. From a company that you're dissatisfied with because they've broken promises to you in the past!

That's Reason #1; Reason #2 is just a strong

• "Well, I'm leaving the company because of five solid reasons, none of which have to do with my current salary..."
• "How about we give you more money?"

... even if they followed through and actually gave you a raise, you're still going to:

• Be Bored
• Have a bad career progression
• Not be able to try anything new
• Work for leadership you're dissatisfied with
• Work for a company that breaks its promises with you

EDIT: Sorry, there's a Reason #3

"... but, this seems to be too good to be true! They're offering a life-changing amount of money in the near future!"

... which should always instinctively make you respond, "If it sounds too good to be true, it probably is!"

Answer 4

See my answer here - Ways to respond when HR says your market salary range research isn't correct?

Basically.... Why stay on a counter offer when you could start somewhere else at 50% more?

You have hit your ceiling.

Whether this money materializes, you will likely not progress any further here.

At other place, you are starting at 50% more. That's your new floor, which you will move up from.

Answer 5

We hear from all the counteroffers that go bad. Recruiters who want you to switch tell you these stories to get you to switch, and of course Recruiters hear counteroffers that go bad, because people call them again later. But recrutiers don't hear counter offers that go well. So the good cases are hidden.

I have experienced counter offers that have gone well. Not for me personally, but for coworkers. On average it's better to turn down counteroffers. You have to judge for yourself if you belong to the exceptions.

The questions you have to ask is:

Do you have valid reasons to believe sufficiently enough things will change to make you happy with the decision you stayed? You could earn a lot of money, but you could earn 0 from equity. But money is only one reason you want to leave, what's with all the others? Boredom and personal growth most likely will not be affected by more money. The leadership direction most certainly will stay as it is.

Do you trust them not to use the opportunity to stab you in the back? So, is this a sincere offer, or do they buy time for themselves to get rid of you once they found a replacement?

If you accept it, insist on all conditions being written down in a supplementary contract. As you have seen, promises are cheap, so don't accept just promises.

Answer 6

There are good answers here already to your final question "Does any of this ring alarm bells for anyone?" But I think you're starting from a problematic premise, which is "do I trust an employer who has broken promises in the past?" The answer to that is of course not.

But there's a different question I think is lurking behind that question, which is how to be able to trust your employer. And that part is somewhat easy to answer and should help you in your decision to stay or leave. You need to get the things they are promising you to be promised in such a way that you can trust them. This means:

• The bonus is paid now, not at the end of the year. This makes it as good as salary, or perhaps better (since you're getting it all now). If they can't give you the bonus now, you need it as salary and not as an end of the year bonus.
• The equity is written into a contract you get to review before you decide whether or not you're leaving. You'll then bring that contract to a lawyer and make sure that it is ironclad and doesn't have edge cases where you won't get paid. You can also reasonably ask for the companies financials if you don't have access to them already since you need to judge the worth of the equity.

Since your employer has broken promises in the past it's on them to make the current offer something they can't break. That is how you can trust them in this scenario. If they are not willing to do that work then the answer is that you can not trust them.

Answer 7

OK, so if I'm reading this correctly, your company, within 15 minutes of receiving your resignation, offered to match your new offer, with the additions that:

• You will continue to make your current salary and then get a big end-of-year bonus to make up the salary difference (this isn't a salary increase, it's simply a promise of a bonus, more on this in a moment)
• You will also receive equity in the company

This raises a few flags:

1. This decision came back in 15 minutes, and the amount of money involved is 50% of your salary. The company is able to spend tens of thousands of dollars in 15 minutes, just because you put in a resignation. This screams to me that the company knows you're being underpaid and simply decided not to tell you or give you the raise you deserved, just because they're cheap and/or greedy (that's the only reason to not pay your people what they're worth when you are able to do so easily). What's to say in another 5 years from now, as inflation (at least in North America) is poised to skyrocket, that you won't find yourself in this same situation again, where your wages have stagnated because your company directors are cheap, greedy, or both?

2. The end-of-year bonus thing is kind of sketchy. First of all, before you can even reasonably consider this, it absolutely must be in writing, that you will be paid a particular sum on a particular day; there are too many stories of bonuses that are promised but never materialize. So before going forward with even considering this counter-offer, make sure that's in writing. Now, the other problem with this is, the way I read it, you're getting the difference between your current salary and your competing salary, in a lump sum, at the end of the year. The problem is you're being shortchanged. Here's some math:

Let's say you make $240k/yr (just using this to get nice round numbers in the math, ignore the actual numbers here), so 50% of your salary is $120k, which is the amount of the bonus. If this was paid as a salary, it would be paid $10k/mo over 12 months, or it can be paid as a lump-sum at the end of the year.

Now, let's say you are investing your money (which you should be) and not letting it rot in the bank. Let's say you are getting a rate of return of roughly 0.5% per month, which is modest (works out to slightly over 6% per year). Ignoring compound interest for the moment (and this is a BIG deal, but the math is hard so I'm ignoring it to make the math easier), this is what this looks like:

In month 1, you invest $10,000 and get $50.
In month 2, you invest another $10,000 ($20,000 total) and get $100
In month 3, you invest another $10,000 and get $150.
...
In month 12 you invest another $10,000 and get $600.

The total amount of money in interest you will get is (600 + 50) * 6 = $3900. It's actually more than that due to compound interest, but as I said I'm ignoring that for simplicity. So in order to make the deal "even", your company actually needs to pay you more than the difference, to make up for the fact that they are not giving you the money in a timely manner. In this example case, the amount of the bonus is $120,000 and the amount is roughly $4000, so we're talking a 1/30 increase, but again I am not counting compound interest; the real number is probably closer to 1/20 and that's conservative (it assumes only 6% per year which is very easy; the real number is probably closer to double that if you get a good wealth manager).

So, even accounting for the fact that they are paying you this bonus, and assuming it all goes to plan and they don't try anything fishy, they're still scamming you unless they raise the amount by at least another 5-10%.

3. Equity means nothing until the company is sold. You should only accept it if you truly believe in the company; if you have any doubt as to the company at all, you should just let it go in one ear and out the other and don't even consider it. You may want to ask for company financials to inform you better on this point, but even knowing the company financials only tells you that your equity isn't worth actual zero; it doesn't tell you positively that it's worth anything. So don't even worry about this.

4. The other issue with the bonus is that it might disqualify you (not legally, but de-facto) from receiving an additional bonus. Like, say that annual bonus time comes around, you worked your ass off, everyone gets their bonuses, and you get jack. You say, "Where's my bonus? I worked my ass off". Management comes back to you and says, "Oh, we gave you your bonus, as we agreed, that's your bonus thanks for your hard work". How would that make you feel? You know this company has a culture of broken promises, so why would this be different?

5. Even if you could resolve all of the above problems, is money really even the issue here? Would you stay at this company if they simply paid you more? The issues you raised, e.g. boredom, desire to broaden your horizons, and broken promises, are not issues that are easily solved with money. Is money even the issue at all?

Answer 8

A company that immediately matches an offer at 150% of your salary knew they were underpaying you and were just hoping you wouldn't complain too much. Good leadership would have been looking after you to make sure you were happy with your compensation in the first place.

What's worse is that this isn't even being added to your contracted salary, it's just another promise. Counter offers aren't the worst thing in the world to accept, but this one in particular looks like a shit deal. Unless everything is laid out in a written contract, assume it's a delaying tactic to start knowledge transfer. Even if it's written out it could still be a delaying tactic, especially if the terms stipulate your staying on board for x duration before receiving said bonus/equity.

If they've been closed fisted in the past you can safely assume they'll be so in the future. New job, new you.

Answer 9

You listed five reasons why you want to move. They all look perfectly rational IMO.

So, the question is, how does a supposedly "guaranteed" annual bonus, and some worthless share certificates that might or might not have value at some unknown future date, address those five reasons?

The answer should be obvious: they don't address any of them. They are just BS to try to get you to have an emotional, illogical reaction, change your mind and stay.

Actually, you now have six reasons to leave: the management has just told you they think you are the sort of fool who will accept what they just offered you.

BTW what does a "guaranteed annual bonus" even mean? Guaranteed for how long? I would bet on just one year if you get lucky, and maybe not even that if something happens which makes it "impossible" to pay it.

Answer 10

1. They didn't match the salary increase. That bonus may or may not come, and there were already broken promises. Don't believe for a second in that bonus.

Solution: Ask for an actual change in salary, bonuses are not salary.

2. They already won 50% of your current salary for the past year at least. That money is your money.

Solution: Ask for a bonus for the previous year equal to half your annual salary. Count that as a good job bonus.

3. They already promised you x amount of shares equity and didn't happen. That was your previous offer to them.

Solution: Ask for double of whatever they promised before.

You probably have d number of days to accept the offer to the other company. Give your current company d/2 number of days to make everything above happen, i.e. signed contract for increase in salary, signed bonus and money sent to your account, and signed contract for equity that you get now, not in the future.

If they don't make everything happen by day d/2, don't yet accept the new offer. Wait until d-1. During this time, your current company may accept all your previous terms. Tell them it's too late. Those conditions expired. Ask something more, e.g. an extra 10% in salary, equity, and some improved working conditions, e.g. standing desk, a bigger screen, whatever.

If they will accept your conditions, you made a significant improvement in your life. If they don't, you'll happily leave to the new company.

Don't hesitate, and don't take anything personal. Business is business.

Answer 11

Never accept counter-offers

You have already been flagged as “disloyal” by management and they will be seeking to replace you at their earliest possible convenience.

The counter-offer itself is not in good faith

• An “albeit” raise is not a raise
• A promise of equity is not equity (particularly since this particular promise has been decaying for 3 years now)
• A sincere counter-offer is made in writing because a professional understands that a fellow professional expects the safety and security of established contract law.

Answer 12

Is this a chance for you to "have your cake and eat it"?

If they're serious about your bonus, ask them to pay it within the week. And the equity paperwork too.

And then once the money is in the bank, accept the other role.

<insert machiavellian laugh>