Robin Throckmorton, MA, SPHR is the President with strategic HR, inc., a human resources management firm located in Cincinnati, OH.
Robin manages a nearly 20 year old human resources management firm that helps business attract and retain a competitive workforce across all areas of HR including recruitment, training, development, benefits, compensation, communications, employee relations, recordkeeping, health safety & security, and employment regulations.
However you choose to handle the situation, consider your response carefully. Yes, consider his contribution to the organization. Is the raise deserving? How are raises determined in your organization? Is this something you need to consider changing? Are you comfortable making an exception? Are you willing to make an exception for the next person that asks?
No employee is irreplaceable. Bottomline, an employee is trying to force your hand. In my experience, counteroffers rarely work. If an employee is already considering leaving, this is likely what he will do at some point, even if he accepts your counter now.