Counter Offer Trap: Why More Pay Won’t Stop Employees From Leaving

The counter offer trap happens when an employer throws more money at a resignation and assumes the problem has been solved.

The employee stays, the manager relaxes and HR updates the salary. Everyone pats the person on the back, relieved that they stayed because the whole workflow depends on them.

Then Monday arrives, the employee still reports to the same manager, handles the same workload and sees the same limited career path. 

The only difference is that leaving has become slightly less urgent (can wait for another 3 months before they leave) and staying has become more expensive for the company.

Counter offers are not always bad. If an employee likes the job but has fallen below market pay, correcting the salary is entirely reasonable.

The mistake is assuming every resignation is a salary negotiation in disguise.

Why Are Counter Offers Becoming a Bigger HR Issue?

Malaysia recorded approximately 9.21 million jobs in the fourth quarter of 2025, with around 198,100 vacancies across the economy, according to the Department of Statistics Malaysia. Employers may therefore still struggle to replace experienced employees quickly, especially in specialised positions.

Employees also know that changing jobs may produce a better outcome than waiting for the annual increment or for a senior position to become available.

According to the 2025 Hays Asia Salary Guide, 62% of Malaysian professionals surveyed said they were looking, or planning to look, for a new job in 2025.

Meanwhile, Aon reported that Malaysian businesses were budgeting an average salary increase of 4.8% for 2026. The Malaysian Employers Federation separately projected average adjustments of 5.33% for executives and 5.01% for non-executives.

Those are meaningful increases, but they may still look modest beside an external offer that includes:

• A more senior title
• Better flexibility
• A healthier management relationship
• A clearer career path
• A more supportive team environment

That gap is where the counteroffer trap can begin.

Does Salary Matter, or Is That Just an Excuse?

Salary truly matters, it’s what motivates people to work hard or pretend to work hard while finding another job.

To give some context, Malaysia’s median monthly wage for formal employees was RM3,167 in December 2025, up 4% from RM3,045 a year earlier. 

Employees are seeing wage growth, but many are also comparing their pay against rising responsibilities, cost of living,  and what new hires are receiving.

However, salary is not always the whole story.

Hays found that the desire for new challenges had overtaken low salary as a leading reason employees across Asia considered leaving. 

That may sound surprising. Why would anyone actively want more challenges at work?

The answer is growth. 

The employer therefore needs to ask a blunt question:

Is the employee leaving because we pay too little, or because working here has become too painful?

The first problem may be fixed with money, the second usually sends an invoice later.

What Problems Can a Counter Offer Actually Fix?

A counter offer is most effective when the reason for leaving is specific, measurable and genuinely reversible.

This is where many companies get lazy because they solution is:

• Use salary to solve a workload problem
• Offer a promotion with no additional authority
• Promise flexibility without telling the manager
• Invent a new title while keeping the same job underneath.

This is similar to throwing a coat of paint and calling it fixed, that’s not it and employees know that.

What Does the Counter Offer Trap Look Like in Practice?

Let’s have a hypothetical example, a Malaysian SME with a six-person finance team.

Its senior accounts executive earns RM5,500 per month and has gradually taken on reporting, audit coordination and junior staff supervision. 

She asks twice about progression or increment but receives vague answers.

Six months later, she resigned after receiving an offer of RM6,500 and a proper assistant manager title.

Her employer immediately matches RM6,500.

On paper, the problem appears solved. But really:

• Her workload is unchanged.
• No promotion criteria have been documented.
• She still supervises staff without formal authority.
• Her manager is annoyed that she resigned (big problem)
• Another senior employee learns about the raise and begins checking job advertisements.

The company has not retained her because it fixed the job. It has retained her because it matched the price of leaving.

Unless the role, authority and working relationship change, the resignation letter may simply return later.

What Is the Resignation Premium?

For the purposes of this article, the “resignation premium” means the additional salary increase offered only after an employee resigns. 

Suppose an employee would normally receive a 5% increment but is offered 18% after handing in notice. The additional 13 percentage points are the price the company pays for acting late, similar to a fine.

That may expose what could be called retention debt.

Retention debt builds when a company delays:

• Salary benchmarking
• Career conversations
• Promotions
• Workload reviews
• Recognition
• Succession planning

The debt remains invisible until someone resigns. Then it becomes urgent, expensive and somehow capable of receiving management approval within a day when previously, a salary increment would take months.

Before approving a counter offer, employers should compare the proposed increase against:

• The employee’s market value
• Pay levels for comparable colleagues
• The cost of recruiting a replacement
• The time required to rebuild productivity
• The employee’s likelihood of staying
• The cost of fixing the underlying issue

Sometimes the counter offer is still the cheaper option. But “cheaper than replacing them” is not the same as “likely to work.”

Can a Counter Offer Create a New Retention Problem?

Absolutely, especially when the company ignores internal pay fairness.

A public counter offer may place the resigning employee close to, or even above, colleagues with greater experience. This can contribute to pay compression, where differences in responsibility are no longer reflected clearly in salaries.

The remaining employees may reach an inclusion:

 “Loyalty earns a yearly 5%. A resignation letter earns 18%.”

Once that belief spreads, HR may receive more “unexpected” resignations from people who have simply learned how the system works.

Before approving a counter offer, employers should check:

• Where the new salary sits within the role’s range
• If similar employees are also underpaid
• Is the increase objectively justified
• Will future increments will remain manageable
• iS the role itself has been incorrectly graded

Saving one employee while upsetting four others is not a retention win, but it serves as a wake-up call that perhaps your employees have been underpaid for a long while.

Should You Make a Counter Offer or Let the Employee Go? 

Not every resignation is a crisis. Sometimes it is overdue information about a role, manager or workplace problem that the company has been avoiding.

What Should Happen After the Employee Accepts?

An accepted counter offer needs more than a revised payslip.

HR and the manager should create a short 30-, 60- or 90-day action plan covering:

• What changes were promised
• Who is responsible for delivering them
• Whether the workload will change
• What career steps will follow
• When progress will be reviewed

The manager must also avoid treating the employee as disloyal. 

Keeping someone and then excluding them from projects, promotions or sensitive discussions is a good way to make sure the second resignation arrives faster.

More importantly, the employer should also investigate why the issue reached the resignation stage in the first place.

A counter offer should produce organisational learning, for it exposes a bigger part of the problem.

How Can Employers Avoid the Next Counter Offer Crisis?

The best counter offer is the one the company never needs to make, in other words try to have one-on-one or stay interviews with employees every now and then.

That does not mean matching every market offer or handing out promotions whenever someone looks unhappy. 

Employers should:

• Benchmark salaries regularly.
• Hold stay interviews with important employees.
• Discuss career progression before appraisal season.
• Review workload by team and manager.
• Document important processes and relationships.
• Build succession plans for critical roles.
• Track resignation patterns across departments.

A company that discovers an employee’s value only after they resign has a management problem and will lose talent to competitors.

Editor here: Most of our staff and writers were from other newsrooms and content agencies before joining us and with it, we acquired their experience, skills and awful sense of humor. 

Conclusion on Counter Offer Trap in Malaysia

A counter offer can work when it corrects a genuine salary gap or another specific issue the company is prepared to fix.

It becomes a trap when more money is used to cover burnout, poor management, weak career progression or broken trust. The employee may stay, but the original reason for leaving stays too.

Employers should diagnose the resignation before pricing it. If the company cannot clearly explain what will change after the employee accepts, the counter offer is probably buying time rather than loyalty.

For more workplace, HR and management insights, our business news site produces clear guides for Malaysian employers, decision-makers and business owners. These resources help companies understand workforce trends, avoid expensive management mistakes and make better-informed business decisions.

Source list:

• Department of Statistics Malaysia (DOSM) — Labour Market Review, Fourth Quarter 2025
• Department of Statistics Malaysia (DOSM) — Employee Wages Statistics, Formal Sector, Fourth Quarter 2025
• Hays Malaysia — Salary No Longer the Top Reason Employees Leave
• Aon — 2025 Salary Increase and Turnover Study for Malaysia
  Supports the projected average 4.8% salary-budget increase for Malaysia in 2026.
• Malaysian Employers Federation, reported by New Straits Times — Malaysia Pay and Salary-Increment Projections
• Chartered Institute of Personnel and Development (CIPD) — Employers Turning to Counteroffers, Labour Market Outlook