How to Respond When a Key Employee Brings a Competing Offer You Can't Match
Derek sent the meeting request at 8:47am with the subject line "Compensation Discussion." No preamble. No "when you have a moment." Just a calendar invite for 2pm with a single-line description: "I'd like to discuss my current compensation in light of a recent external offer." You know exactly what this is. Derek built your analytics infrastructure from scratch. He trained the team. He is the reason the executive dashboard exists. He is also making $120K while the market pays $155K for what he does, and someone finally put that number on paper. Your budget allows 10-15% — roughly $132-138K. The gap between what you can offer and what he's holding is $17-23K. You cannot win a bidding war. You can, however, win Derek.
Why This Conversation Goes Wrong
You try to discredit the competing offer. "Those big-company salaries come with trade-offs" or "You should look at total comp, not just base" sounds dismissive when Derek has done his research. He knows the trade-offs. He is here because he wants to stay. Questioning his data turns an ally into an adversary.
You stall. "Let me take this back to leadership and get back to you" without a specific timeline or interim commitment gives Derek nothing to work with. He leaves the meeting the same way he entered — wondering if the company values him — and the recruiter emails again at 5pm.
You match the number by robbing future raises. Promising $155K by pulling forward two years of planned increases sounds like a win today. In 18 months, when Derek has had no raise for two consecutive reviews while his peers get increases, you will have this exact conversation again.
You appeal to loyalty without substance. "We're a family here" and "Think about what you'd be giving up" are emotional arguments that work on people who haven't done the math. Derek has done the math. He needs numbers, not sentiments.
The Whole-Picture Offer
When you cannot match a competing salary on base alone, you have two options: lose the employee, or expand the definition of compensation until the package tells a story that base salary alone cannot. The Whole-Picture Offer works because it addresses what the employee actually wants, which is rarely just a larger number on a paycheck.
Validate the market data openly
"You're right that $155K is in range for your skillset and experience. I'm not going to pretend otherwise or tell you the market is wrong. You've done the research, and it checks out." Starting by agreeing with his data disarms the adversarial dynamic. Derek prepared for a fight. Validation turns the conversation into a partnership.
Be transparent about the constraint
"Here's what I can do on base: $138K. That's the ceiling for my budget authority right now. I want to be upfront rather than making you wait for a number." Transparency builds trust. The worst thing you can do is dance around the number. Derek respects directness.
Expand the canvas
"But base is only one piece. Let me walk you through what I can do on the total package." Then present the non-base elements: title change to Director of Analytics, two additional remote days per week, accelerated equity vesting, $15K annual professional development budget, or a guaranteed spot in the leadership development program. Each element should be specific and immediate — not "we'll look into it."
Ask what matters most to him
"Of everything we just discussed — the base, the title, the flexibility, the equity — what matters most to you? I want to build this around what you actually care about." Derek probably prefers staying. He loves the team and the work. But he needs to feel that the package respects his value. Letting him prioritize tells you exactly where to concentrate your offer.
Set a decision timeline that works for both sides
"I want to give you time to think, but I also want to move fast because losing you is not an option I'm willing to accept. Can we reconvene Friday with final numbers?" Urgency without pressure. This also gives you time to secure any approvals for the non-base elements.
The moment that changes everything
He doesn't want to leave. He wants to stop feeling underpaid.
Derek has been underpaid for at least 18 months. He knows it. His manager knows it. His manager has been advocating for a raise for over a year. Nothing happened. Then a recruiter put $155K on paper and suddenly the company is ready to talk. Derek is not angry about the salary gap. He is angry about the timing. The competing offer should not have been necessary for the company to value him at market rate. The package you build today needs to acknowledge this implicitly: not "we're matching because you threatened to leave" but "you should have been compensated better sooner, and here is what we're doing to fix it." The distinction matters because Derek is not deciding between two numbers. He is deciding between a company that needed to be forced to value him and a company that valued him immediately. If your offer package makes him feel like a priority rather than a reaction, the $17K gap closes itself.
What to Say (and What Not To)
Instead of
"We can't match that offer."
Try this
"The base I can offer is $138K. Let me show you what the total package looks like alongside that."
Instead of
"Think about what you'd be leaving behind."
Try this
"You built this analytics infrastructure. I want to make sure the compensation reflects that — here's how."
Instead of
"Those big-company salaries aren't what they seem."
Try this
"Your market data is solid. Let me be transparent about my constraints and creative about the solution."
Instead of
"Let me get back to you."
Try this
"Here's what I can commit to today. Can we finalize the full package by Friday?"
Instead of
"We really value you here."
Try this
"Your manager has been advocating for this adjustment for a year. I want to make it right, and I want to do it now."
The Bigger Picture
A 2023 PayScale report found that 44% of employees who receive a counter-offer leave within 12 months anyway — but that statistic masks an important variable. When the counter-offer addresses only base salary, the 12-month attrition rate is 58%. When the counter-offer includes non-monetary elements the employee specifically requested — title, flexibility, development — the attrition rate drops to 23%. The lesson: matching a number retains a paycheck. Matching what someone actually values retains a person.
The internal equity challenge is real but solvable. Research from WorldatWork shows that organizations with transparent compensation bands see 21% lower voluntary turnover than those with opaque pay practices. When Derek's raise is justified by a market adjustment aligned to published bands, his peers see fairness. When it is justified by "he got an outside offer," his peers see a playbook for getting their own raise — and the cycle perpetuates.
Derek's situation highlights what compensation researchers call the "loyalty tax" — the well-documented phenomenon where external hires are paid 18-20% more than internal employees with equivalent skills. A 2021 study in the Journal of Labor Economics confirmed that the penalty for staying at one employer for more than two years is a cumulative 7-10% salary deficit compared to job-hoppers. Companies that fail to proactively adjust internal compensation are not just losing individuals. They are systematically training their best people to leave.
Practice This Conversation
8 minutes · AI voice roleplay with Derek Washington
Reading about this is step one. Practicing it changes everything. Sonitura lets you rehearse this exact conversation with Derek Washington, a realistic AI data analytics lead, 4 years at the company who reacts to your words in real time. It takes 8 minutes. The next time someone walks in with a competing offer you can't match on base, you'll know how to build a package that makes the gap irrelevant.
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