Salary Bidding War Between Companies: What is Professional Etiquette?

Question

I am blessed to be gainfully employed by a large fortune 500 company and have been approached by a small company in the private sector with a compelling offer that I would like to accept.

I notified my employer of my intent to leave, who asked me to pause while they assemble a counter-offer.

The Problem

The small company package is 20% more valuable than my current wage. The large company plans to counter with a package 30% greater than my current wage.

My Questions

1. After I receive the counter offer, is it courteous/acceptable to approach the smaller company and ask them to match the larger offer? If so, is it unprofessional to ask both parties for a best-and-final offer?

2. In the event I accept the smaller company's offer, the large company asked that I consider contracting my services for 6-12 months after my departure, nights and weekends. Is this common? The companies are in different industries and are not competitors.

Update: 2016-02-09, copied from comments

A lot has happened since then, but long story short I gave 30 days notice and went with the private sector offer. It turned out to be the best decision I ever made; the private sector was a better personality fit and gave me room to really innovate/excel. I've since been promoted to senior management and my standard of living largely exceeds what the counter-offer in the original post would have provided. Not for everyone, but def would not have happened if I stayed at the big public company.

Answer 1

Be wary of accepting a counter-offer. If you take the counter-offer, when the next performance review comes around, you may hear that you are now above the top salary for your pay grade, and are ineligible for further adjustment. It's also possible that you will be looked upon as disloyal, and will not be considered for further promotion. At worst, you could accept the counter-offer, then find yourself training your replacement and then dismissed.

Your new employer is hiring you hoping you will do well, and they are probably prepared to give you a further increase if you perfom well over the next year.

Besides, do you want to stay at an employer who acknowledges that their practice is to knowingly underpay critical employees?

In short, if the new opportunity is attractive for reasons beyond salary, take it and leave the 10% on the table, or tell them you have a higher offer and see if they will match it. There is no need to tell them it is a counter-offer from your current employer.

Answer 2

The question seem to focus on remuneration package only and the following part of the answer will keep the tone.

1. In many cases, when current employer tries to stop an employee from leaving offering them better salary people go to the new potential employer with this and most of the the time the least they get is similar proposal. Personally I treat just as specifics of labor market which gives power to employees, e.g. IT job market these days, and I don't think it is bad or wrong, even though I've lost a bunch of people because of such actions.

   Going further, if I made you a counter-offer once I won't give another. It's not some kind of weird auction. At this point it is take it or leave it.

2. If you consider working for both parties start with making it clear for both companies, especially for your new one, asking them if it is OK. Considering the companies don't compete odds are everyone would be OK with that. As long as you're honest with all parties it won't be considered unprofessional.

   The bigger problem however is whether you're able to cope with both jobs. Much depends on how the contract terms would look like, but if it's going to be "nights and weekends" I really challenge the assumption you would manage. I can hardly think of any people who were able to work like that longer than just a few weeks, let alone the whole year.

However, when I read your question I instantly thought that we might be discussing the wrong thing here.

You seem to bring down the value of the offer to material things only. I would look more on non-material aspects on work: how it is going to develop you, whether you're going to like, how it would affect your pace of learning, etc. I would take worse salary with better opportunities of learning than the other way around. It will pay off big time in the long run.

So my advice would be: if you're talking about 10% difference in remuneration package, forget about the money and focus on other aspects of work -- simply which one you're going to like better or which one helps you to push your career in desired direction.

Note: focusing heavily on salary negotiations you also send a signal to your (potential) employers: what I care about is money; not the stuff you build, or the people I'll work with, or the things I'll learn, but money. It is unlikely that this will be a problem for a Fortune 500 company. It might be for a small company.

Answer 3

is it courteous/acceptable to approach the smaller company and ask them to match the larger offer?

Above feels slippery.

To stay on the safer side, I would at least use different wording than "ask them to match". Say, informing them on higher counter-offer (purely informing - no pressure please) would be both courteous and acceptable, I would definitely do that. There could be further negotiation involved down this road, but it is rather impossible to give a one-size-fits-all advice here.

2) In the event that I accept the smaller company's offer, the large company asked me if I would consider contracting my services to them for 6-12 months after my departure...

First thing I'd consider in this case would be to consult with that smaller company. I would try to avoid risking my relations with the guys I am going to spend next few years working with.

A nice "side effect" of this would be an extra-proof that I can be a valuable asset indeed. This may be helpful since in the beginning of the career there is often a degree of uncertainty whether the hiring decision was right.

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_{A word of caution: when negotiating in the bidding war, keep your eyes on mid-term perspectives, not only the short-term ones.}

_{As an example, salary I once got thanks to some bidding war put me into the grade level higher than I was really ready for. As a result, I spent two quite tough years trying to catch up to the required level before this discrepancy bites me.}

_{And this is not specific to me or the company I landed in: many of my friends who happened to get to another side of "bidding fence", into another company, had similar problems too. They told me performance reviews turned out quite a hard game for them because of the non-favorable comparison to guys hired outside of war period being paid less for doing same job.}

Answer 4

Is this really only about money? If it is, then you are free to shop your services for the highest rate you can get.

If it's about something else — better long-run opportunities at the small company, people you would miss at the large company, a better work environment at one of the two, whatever — then you need to think long and hard about what each company would do for you. Larger companies are more stable, but also tend to be more hidebound in their approach to things; smaller companies tend to move more quickly, but often get acquired by larger companies or simply lose funding or go out of business for other reasons.

In short, make sure you know what you're really looking for.

Answer 5

I wouldn't bother asking for a best-and-final offer, I would imagine that your current companies offer will be their last, and if the smaller company responds that will be their last as well. I don't see either company treating it like a bidding war on ebay and going up by 50 cents an hour for each offer...

As for your second question, I don't think it's common, but neither is it unknown. I don't see how accepting the contracting offer would burn any bridges, quite the opposite in fact. You should probably run it past your new employer, being clear that they will be your priority once you start working for them, and include an out in the contract with your old company so that you can cancel it at any time if it is causing problems with your new company. Get feed back from your manager at the new company before accepting the contracting offer from your old.

Answer 6

First let me give you some points about salary.

• If your current company was underpaying you by 25%, it suggests that they are clueless about the market or your market value, or they are willing to only pay market rates to people about to leave, or their business is so bad that they have to pay below market. (Not unlike a person who thinks a potential dating partner is undatable until that partner starts dating somebody else).
• Big companies usually pay more than small companies for comparable talent.
• Small companies often don't give raises unless they smell attrition. Big companies try to keep up to the market and this helps them ward off attrition.

As for the contracting, I wouldn't do it. You'll probably be working more hours at the small company, and the contracting would be an undesirable distraction. However, if the money is good, it may be worth putting your health and social life on hold for a year, but I think that's unlikely.

Keep in mind also that the big company has tipped their hand by asking for contracting. It suggests that they really value your work and are willing to go outside of traditional work boundaries to garner your services.

At this point, you have to decide who you want to work for.

• If it is the small company, you could mention the counteroffer, and see if they give you a better offer. You have nothing to lose, because they have already gone through the trouble to find and vet you, and it would cost them 10% of your salary (in direct costs and opportunity costs) to find another suitable candidate.
• If it is the big company, you might be able to squeeze more money, or more vacation, or a title change, or a grade change, or a commitment for paid training in addition to their 30% counteroffer. (You can only do this because they asked you to contract out to them if you leave).

Answer 7

First, I want to address all the negatives about counter-offers. I don't think people are accepting the way things are priced in the real world and it's probably why they're not in sales (And why sales people do a better job of getting higher salaries.). There are many forces at work that affect a salary and the main one is what someone is/was willing to accept. The open market is not the only driving factor. Some employees are worth more to a specific company. When a particular position is worth less to the company than what the market indicates, the company is in a bind and may have to get less talent or someone, for whatever reason, is willing to accept the lower offer.

The reason your current employer didn't pay you more is they didn't offer and you didn't ask for more. That's really the bottom line. Over the course of time, people realize their talents are worth more, but usually not until they get a better offer. Example: If your work generates a million dollars in revenue, no company can afford to pay you that much, so how much do they have to pay you? Half? 90%? If they can get someone for 30% and not deal with the negative consequences that can come from too little salary (turn-over, lack of effort, unhappy employees, etc.), they'll do it until someone asks for more.

What to do in your case. If you are considering taking the counter-offer, just tell the other company, my company made me a better offer. They can decide to make another offer or give some other reason why they think you're better off joining them without the increase salary.

Don't even think that you're doing anything wrong. You didn't force your current employer into making a counter-offer. Your employer wanted to make a counter-offer, and when anyone tries to hire someone away from a current job, they better know that can happen. To think any less of someone who stood up for themselves by asking for more, are totally unprofessional, childish and need to understand the concept of "It's just business." When people don't demand what they're worth, they are not respected as much. If someone doesn't "like" you because you asked for more money, that's their problem. We work, we get paid. You make something, you try and sell it for what it is worth. Don't waste your time with people who don't want to pay you what you can get.