Salary benchmarking, sometimes known as compensation benchmarking, is when businesses match job descriptions and pay ranges to positions in other organizations. Salary benchmarking allows HR to understand the average salary for a specific job.
How do companies benchmark salaries?
Companies can follow the following steps to benchmark salaries:
- Collect salary data: Choose which roles to benchmark and gather data from professional networking websites, data-sharing websites, salary software, and others.
- Create a compensation strategy: Ensure the compensation strategy fits into the business’s overall strategy and company values, the organization’s size, location, and similar positions in the company.
- Set a salary range: For each role, create a minimum and a maximum salary candidates can receive. Along with skills and experience, the salary range can help HR negotiate salaries.
- Document the process: Keep all benchmarking data for C-level management to promote transparency. A transparent compensation strategy will show employees that they receive fair salaries.
What are some best practices for salary benchmarking?
If done correctly, salary benchmarking can help companies attract and retain talent. A few best practices include:
- Checking sources: Use only reliable and up-to-date information to keep the process fair and accurate.
- Ensure job descriptions are well matched: Check the job description and make sure the responsibilities and title are similar to the ones being benchmarked. Consider the location and size of the organization, whether the role is remote, in-office, or hybrid, and if applicable, how many people report to the leadership role.
- Consider all compensation methods: Compensation consists of more than just salary. Factor in costs such as bonuses, stock options, paid holidays, pension plans, and profit sharing.
Why should HR conduct salary benchmarking?
HR leaders practice salary benchmarking to stay current with the global job market. Salary benchmarking helps HR build enticing, competitive salaries that can attract top talent and improve the employee experience.