Salary Benchmarking 101

By itself, the term “benchmarking” refers to the process of evaluating or checking something against a predefined comparative standard or point of reference. In that vein, many companies, organizations and businesses use the strategic process of salary benchmarking to gauge the attractiveness of their internal job positions by comparing them to those same positions of their competitors and similar companies. These comparisons can be broken down by geographical location, industry, company size and so on, depending on how the data will ultimately be utilized.

Why Benchmark Salaries?

The implications of salary miscalculation or misestimation are huge. By underpaying employees, companies can lose their ability to attract and retain qualified talent. On the other hand, overpaying employees can negatively affect payroll budgeting efforts. Salary benchmarking allows companies to offer salaries and compensation structures that are attractive to employees while still promoting organizational profitability. 

Many organizations already have an annual or semiannual benchmarking process built into their hiring efforts. Others are gravitating toward a similar practice for any number of common HR or budgeting scenarios. Salary benchmarking can add tremendous value to an organization when it is:

• Hiring new employees for a position.
• Hiring in a new or unfamiliar market or industry.
• Hiring for position(s) that is/are entirely new to the organization.
• Ensuring that salary structures remain competitive for positions or knowledge bases that are gaining market value (IT professionals, healthcare practitioners, etc.).
• Budgeting for annual employee salary increases as well as employee promotions.

So how does one obtain the necessary salary data that makes benchmarking a beneficial and cost-effective exercise? Find out more and read the whole article here.