A counter offer letter is what an employer sends when they want to keep an employee who has received another offer, by matching or beating it. It can save you the cost of replacing someone (typically 1.5 to 2x annual salary), or it can buy you 6 months before they leave anyway. The difference is in the letter.
This guide gives you a framework for deciding whether to extend a counter offer, what to include when you do, five templates you can adapt, and the common mistakes that turn a counter into an exit anyway.
What is a counter offer letter?
A counter offer letter is a written response from an employer to an employee who has either submitted a resignation or disclosed a competing offer. It outlines a new compensation package designed to retain the employee. The package usually combines a salary increase with one or more of: signing or retention bonus, equity refresh, title change, role expansion, or revised reporting line.
A counter offer letter is separate from a regular pay raise. It is a deliberate, time-bound move tied to a specific resignation moment, and it sets expectations on both sides.
When to send a counter offer (and when not to)
The default in most HR playbooks is "do not counter". The data behind that is real: a SHRM survey on retention found that roughly half of employees who accept counter offers leave within 12 months anyway. The reasons that prompted them to look usually were not just about money.
That said, a counter offer can absolutely work in the right situation. Send one when:
- The employee is high-impact and the replacement cost is genuinely high (key technical lead, sole owner of a critical relationship, deep institutional knowledge).
- The reason they looked is fixable with what you are offering. If they want more scope, a title plus expanded responsibilities can close the gap. If they want pure compensation, a real raise can.
- Their compensation actually was below market and you can confirm that with a salary benchmark.
- You have the budget and runway to extend the same offer to peers who would notice and ask later.
Do not send one when:
- The employee disengaged months before they looked. A salary fix will not solve a culture problem.
- The competing offer is from a fundamentally different role (more senior, very different scope). You cannot match what they are actually buying.
- You would resent extending it. The relationship after a forced counter is rarely the same.
- You have peers at the same level who would justifiably ask for the same treatment and you cannot afford to extend it across the board.
What to include in a counter offer letter
A complete counter offer letter answers six questions in plain language:
- What we are offering. The new salary, bonus, equity, title, or role change. Specific numbers, no vague language.
- When it takes effect. The date the new package starts.
- What we are asking in return. Acknowledgement that they will withdraw the competing offer or recommit for a specific period.
- Why we are extending this. One or two sentences on the specific impact the employee has had. Generic flattery is worse than nothing.
- Deadline to respond. Usually 3 to 5 business days. Be respectful but firm.
- What happens if they decline. Brief, gracious, and clear: the resignation stands, and you wish them well.
Counter offer letter template 1: Salary match
Use this when the competing offer is straight compensation and you can match or exceed it.
Subject: Counter offer for your continued role at [Company]
Dear [Name],
Thank you for telling me about your competing offer from [other company]. I want to be direct: I want you to stay at [Company], and here is what we are putting on the table.
We are increasing your base salary from [$X] to [$Y], effective [date]. We are also adding a [$Z] retention bonus, payable in two installments at 6 and 12 months. All other elements of your package (equity, benefits, PTO) stay the same.
You have driven [specific outcome] over the past [time], and that work is hard to replace. We would like to keep building on it together.
If you choose to accept this counter, we ask you to formally withdraw your acceptance of the [other company] offer and commit to staying through [date, typically 12 months].
Please let me know your decision by [date, 3-5 business days out]. Whatever you decide, I appreciate you bringing this to me directly.
[Manager name]
Counter offer letter template 2: Role expansion
Use this when the competing offer is bigger scope, more responsibility, or a more senior title.
Subject: A new chapter for your role at [Company]
Dear [Name],
I appreciate you being transparent about your offer from [other company]. After thinking about it, I want to propose a path forward here that addresses what is drawing you toward that role.
Effective [date], we are promoting you to [new title]. You will take over [expanded scope], including [specific responsibilities]. Your salary moves from [$X] to [$Y], and your equity grant refreshes to [amount].
The decision to expand this role has been on our radar for the last quarter. Your timing has accelerated it, but the underlying recognition is real.
If you choose to accept, please withdraw your acceptance of the [other company] offer and commit to a 12-month runway in the new scope. I would like a written confirmation by [date].
If the [other company] role is genuinely a better fit, I will support a clean transition with no hard feelings. But I would like the chance to keep you here in a role that matches where you have been growing.
[Manager name]
Counter offer letter template 3: Total compensation refresh
Use this for senior employees where base salary alone will not close the gap.
Subject: Your updated package at [Company]
Dear [Name],
Thank you for sharing the [other company] offer with me. I want to keep you at [Company], and we are putting together a package that reflects how central your work has become.
The revised package, effective [date], includes:
- Base salary: [$X] (up from [$Y])
- Annual bonus target: [%], up from [%]
- Equity refresh: [grant], vesting over [period]
- Title change: [new title]
- Additional 5 PTO days per year
This is a deliberate, one-time package adjustment, not a starting point for further negotiation. I want to be straightforward about that. We have built it to match where the market actually is for your role.
Please let me know your decision by [date, 5 business days out]. I appreciate the chance to make this case.
[Manager name]
Counter offer letter template 4: Decline (when you choose not to counter)
Sometimes the right answer is to decline gracefully. This template keeps the relationship and the door open.
Subject: On your move to [other company]
Dear [Name],
Thank you for letting me know about the [other company] offer and giving me the chance to talk through it.
After thinking it over, I have decided not to extend a counter offer. The role you are moving into is a strong fit for where you want to go, and the timing is right. I would rather support a clean transition than ask you to stay against what you have already decided.
Your last day will be [date]. Between now and then, please work with me on a transition plan for [specific responsibilities] so we hand off cleanly. After [end date], the door here stays open if our paths cross again.
Thank you for the work you have done at [Company]. Wishing you well at [other company].
[Manager name]
Counter offer letter template 5: Buy time (rare but real)
Use this very carefully, only when a specific business reason justifies a short retention window.
Subject: A short-term package adjustment
Dear [Name],
Thank you for being upfront about the [other company] offer. We have a specific deliverable coming up, [project], that needs your involvement through [date], roughly [3 to 6 months].
For that window, I would like to offer:
- A [$X] retention bonus payable on [end date], contingent on continued employment through [date].
- Full support from me to make a clean transition to [other company] after [date], including a positive reference.
- No expectation of long-term commitment beyond the bridge period.
This is a short-term arrangement, not a counter to your move. If the [other company] timing does not allow this bridge, I understand and we will plan for an earlier transition.
[Manager name]
Common mistakes that turn a counter into an exit
Even a well-built counter offer can fail if the surrounding behavior contradicts it. Watch for:
- Counter-offering only when they resign. If you would not have raised their salary on a normal review, the counter says "we underpaid you and only fixed it under threat". That message lingers.
- Making it about their leverage instead of their work. "We do not want to lose you" is not enough. "Here is the impact you have had, and here is what we are doing about it" is.
- No deadline. Counters that drag for two weeks get used as leverage by the employee at the competing company, and the relationship erodes either way.
- Promising things you cannot deliver. A counter that includes "more interesting projects" with no concrete change in scope is worse than no counter.
- Not addressing the actual reason they looked. If the reason was a difficult manager, a salary bump from that same manager will not solve it.
What happens after the counter is signed
The work after acceptance matters more than the letter. Three moves that make a counter actually stick:
- Deliver on the role change in the first 30 days. If you promised expanded scope, the employee should see it on their plate within a month.
- Address the underlying reason within 90 days. Whether that is workload, recognition, manager relationship, or career growth, the issue that prompted them to look has to actually change.
- Skip-level check in at 6 months. A short conversation with the employee's manager's manager surfaces whether the retention is real or whether they are mentally already out the door.
Counter offers that stick share one thing: the company actually changes something about the employee's day-to-day, not just the number on the paycheck.
If you do not already have an offer letter template in place, build one before you need it. Counter offers are easier to send when the underlying offer letter process is already structured.
The takeaway
A counter offer letter is a precision tool. Send it when the employee is genuinely irreplaceable and the gap is fixable. Skip it when the underlying reason for leaving is anything other than compensation. When you do send one, be specific about the package, give a deadline, address the why, and follow through on the promises in the first 90 days. Done well, a counter saves a key person and a hire cycle. Done badly, it just delays the goodbye by six months.
