Compensation benchmarking, or salary best practices, compares your organization’s job roles to similar jobs at comparable companies to establish pay ranges. This can help your company attract and retain talent while remaining competitive.
Effective salary benchmarking requires clear objectives and a collaborative approach. Involving HR professionals, managers, and other departments can ensure that the resulting data is accurate and applicable.
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Identifying Your Competitors
Salary benchmarking is a best practice that provides organizations with precise and reliable data on labor market rates for internal job positions. The information helps guide decision-making in hiring, promotions, internal equity salary adjustments, and compensation budget planning.
The first step in compensation benchmarking is identifying competitors for each role. Then, it’s essential to define each job position’s responsibilities clearly. This will help ensure that the compared roles are equivalent regarding required skills, experience, and duties. Once the jobs have been defined, it’s possible to collect and analyze salary survey data and determine the competitive rate for each role.
By following the comprehensive guide to compensation benchmarking, you can gain valuable insights into the competitive landscape and develop compensation packages that attract and retain top talent, ultimately contributing to your organization’s success and sustainability.
Choosing suitable sources for salary benchmarking data is also essential. A leading people analytics solution offers accurate, up-to-date data based on paid salaries. This enables employers to decide based on actual market rates rather than using outdated or inaccurate survey data.
Once you have the proper data, you can identify trends or issues with your current compensation practices. It’s important to remember that fair and competitive compensation includes more than just wages; it can also have benefits like 401(k) matching, vacation time, and other perks. With these tips in mind, you can be sure that your company can attract and retain top talent by offering competitive and fair compensation packages.
When you analyze compensation data, it’s essential to consider the whole picture: base pay, bonuses, and other forms of compensation. Compensation benchmarking allows you to define job roles and responsibilities clearly, align with industry standards, maintain competitive salary structures, and establish fair pay ranges.
The first step in compensation benchmarking is gathering relevant salary data from credible sources. For example, you can use salary surveys, public job postings, and recruitment agencies to collect salary information in specific industries, regions, or jobs. Then, you can examine the data to identify market trends and determine average salary levels for your internal job positions.
Choosing suitable data sources is crucial to ensure your analysis matches your organization’s goals and budget. Consider factors like alignment with your company’s job descriptions, industry and location, and age of the data to make the best choices for your organization. It’s also helpful to weigh the cost of purchasing paid survey data versus free, aggregated information.
Developing and executing a compensation strategy that aligns with industry standards and meets your organization’s goals can be a delicate balance between what talented employees expect to be paid for their roles and what you can afford to pay. Using best practices and tips for salary benchmarking helps you find that sweet spot while ensuring compliance with equal pay laws.
Having the correct data is only half the battle. HR teams and hiring managers also need to be able to understand and interpret the results of compensation benchmarking reports. This way, they can take action to improve their organizations.
The first step is determining the roles and job descriptions you want to benchmark. Then, find data from credible salary surveys, employer websites, and recruitment agencies. Match the internal job description to external job data and compare each role’s responsibilities to determine the most appropriate level for that position.
Once you have the data, you can make compensation adjustments to ensure that you are competitive in your industry and region. This will assist you in attracting and keeping top people while lowering your turnover expenses.
As the labor market changes, it is essential to conduct salary benchmarking regularly to stay competitive. With the help of a people analytics solution like Lattice, you can quickly identify gaps in your pay practices and make necessary adjustments. This will allow you to keep your employees happy, satisfied, and engaged. Employees tend to respond well to compensation benchmarking because it keeps their salaries and benefits packages transparent and equitable, which fosters loyalty. And, as a bonus, it will help you comply with regulations on salary transparency.
Accurate data helps you determine salary tiers and set competitive employee wages. It also makes it easier to recruit talent, keep existing employees happy, and stay compliant with equal pay laws. Depending on the size of your organization, you may have to rely on internal resources or partner with third-party companies to collect compensation data and salary information.
Typically, the best way to gather and analyze data is with an HCM software solution. This can make the process much faster and more efficient. Selecting a solution compatible with your industry, job description structure, and geographic market is essential. It’s also important to consider the availability of free data and whether it’s sufficiently comprehensive and accurate.
Once you’ve collected and analyzed your data, the next step is identifying gaps and discrepancies to create effective compensation ranges. This will allow you to address internal equity concerns and ensure your company offers competitive wages in the marketplace.
Although conducting salary benchmarking can be challenging, it is essential to your company’s success. With the correct data, analysis, and adherence to legal and ethical considerations, compensation benchmarking is a valuable tool for elevating your organization’s talent management. The key is to start early and be consistent with your approach.