Salary Benchmarking - a must do
We all talk about salary benchmarking, but we really don’t understand what it is or why it’s important to an organization. I regularly talk to executives before starting a compensation project who think they need it, but aren’t entirely clear on the initiative and how it can make an impact on attracting and retaining talent. This post will help you get a big picture overview of what it is, why organizations need it, and the implementation involved.
What is Salary benchmarking?
Salary benchmarking is the process of using internal job descriptions to match to established salary survey jobs in order to identify the external market rate for each benchmark position.
Why salary benchmarking?
Companies don’t want to risk losing their top executives to offers of better pay packages from competitors. Salary Benchmarking guides decision making for pay decisions including hiring, promotions, internal equity salary adjustments, and general compensation budget planning. A deep understanding of the external value of each position allows an organization to develop an approach for setting overall compensation philosophy, or the level at which the organization will set salary levels. The ability to balance the needs to attracting and retaining talent with fiscal responsibility of the organization is a key priority for companies.
Salary benchmarking gives a complete breakdown of the compensation package allowing companies to compare salary and benefits available within specific sectors and named companies. So, overall it is a much more exact science than, say, a salary survey.
How to do salary benchmarking?
It is very important to do a comprehensive salary survey for an effective and accurate salary benchmarking. In addition, reputable salary survey companies employ compensation analytical professionals trained to compile, analyze, and publish data in a confidential and robust manner, ensuring a true representation of pay levels in the market. In order to complete a salary benchmarking project, current job descriptions and identified salary surveys which include similar jobs in comparable industries and similar size companies are essential.
Who does the salary benchmarking?
Salary benchmarking can be done internally by HR professionals working with managers to ensure accurate job description content or third-party specialists can provide salary benchmarking services to ensure all positions documented and benchmarked with the external market accurately. Organizations will typically not have the required resources to analyze the data in the most useful way. Enlisting a third party, to carry out this work can therefore saves a lot of time and effort.