What are the advantages of salary benchmarking?

It creates a profile of the company

Among the benefits of salary benchmarking is the way it facilitates an evaluation of your company’s status. It allows you to identify the strengths and weaknesses of your organisation’s pay structure, which then enables you to create an accurate profile of your company.

It saves time and money

Another advantage of benchmarking salary is that the process revolves around existing data. You do not need to invent any figures, as the process works by comparing your existing pay structure (known to you!) with pre-gathered data from your sector, industry, competitors or geographical region. The field is already narrowed for you, and your salary offerings can match your competitors. Salary benchmarking is very efficient with both time and money – compared to the input of each required, it can yield great benefits for your business.

It enables a study of practices

Once you are presented with existing salaries, it allows you to study these practices and, in turn, identify what is and what isn’t working in your pay structures. You can take what is working across the industry and apply it to your business, or, alternatively, you can change practices that do not add value. Ultimately, benchmarking salary enables improvements for many other aspects of business structure.

It enables comparisons

Not only can you form your pay structure using existing salary brackets, but you can also compare the salaries of your company with competitors. You might find that the salary you are offering is above or below that of your competitors. This comparison allows you to adjust your salaries accordingly.

Salaries that are too low will not be appealing to employees, influencing them to look elsewhere for employment. However, salaries that are much higher than those of competitors cost the company more money than what is expected.

It highlights performance measures and processes

Some companies offer pay rises and other perks as an employee progresses in the business. Salary benchmarking also highlights these processes, allowing you to scrutinise the pay measures of competing companies. If a pay rise after the initial six months is standard practice for a role, you will want to implement this in your business to keep up with competitors.

It sets new targets

Salary benchmarks set targets for employers and employees alike. As previously mentioned, the salary benchmark becomes a figure that employers feel they must meet or slightly exceed to attract employees; equally, job seekers are typically aware of the standard salary for the role that they are applying for. Therefore, they will rarely be willing to accept less. One of the advantages of salary benchmarking is that you can be confident that the formal or informal targets you have are still relevant and capable of attracting the people you need.

It allows the implementation of improvements

If the role that you are recruiting for is widely sought after, you may improve upon the salaries that are already on offer for the specific role. Money is one of the biggest incentives in the job market, and if you offer a salary that is marginally higher than the average, this will make the role extremely attractive to job seekers.

Despite this, money is not the sole incentive, and you can make your business seem more appealing than its competitors through other means. For example, you might offer generous holidays, travel or lunch compensation, or even a flexible working structure that allows people to work from home some of the time. Benchmarking salary can give you these insights into where and how to make improvements.

It improves employee retention

A competitive salary and other job perks are ways that make employees feel as though their work is valued. If workers feel as though their pay grade and other job perks could not be matched elsewhere, they are more likely to stay with your company.

For particularly sought-after roles, your competitors may try to poach your employees by offering a multitude of perks. If these perks such as a competitive salary, a pension plan, paid time off, and other bonuses, are already a component of your company, they will not be tempted to stray elsewhere.

It enables equal opportunities

Some companies may be guilty of imposing bias when assigning salaries to certain individuals. One of the major advantages of salary benchmarking is that the individual is not an affecting factor - the salary is attached to the role, and is determined by statistics. This makes for a fairer working environment. As well as being another feature of your business that attracts prospective employees, it protects your organisation against discrimination or unequal pay claims.