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Salary benchmarking is the process of obtaining information regarding pay and benefits for multiple companies.

Salary benchmarking is the process of obtaining information regarding pay and benefits for multiple companies. This then allows businesses to compare the rate of pay offered for the same role across competing companies. From this information, businesses can then calculate the average salary for specific roles within their company. This is sometimes referred to as a salary review.

Salary benchmarking is an important process within businesses as it ensures employees are being paid appropriately and creates a competitive job market, but what are the benefits of salary benchmarking?

 

Salary Benchmarking
It creates a profile of the company

One benefit of salary benchmarking is the way in which 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 is that benchmarking revolves around already existing data, meaning you do not need to be inventing any figures. You are more limited by the process of benchmarking as you are simply adapting numbers from elsewhere. This saves you time and money as the field is already narrowed for you and your salary offerings can match your competitors.

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 working and what is not in pay structures. You can take what is working across the industry and apply it to your business or, alternatively, you can adapt activities that do not add as much value. Ultimately, benchmarking enables improvements for your 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 that 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 benchmarking sets targets for employers and employees alike. As previously mentioned, the salary benchmark invents a figure that employers feel they must meet or slightly exceed to attract employees; however, job seekers are typically aware of the standard salary for the role that they are applying for and therefore will often not be willing to accept less. They have set a target for the pay that they intend to receive.

It allows the implementation of improvements

If the role that you are recruiting for is widely sought after, you may improve upon salaries that are already on offer for the specific role. Money is arguably the biggest incentive 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 occasionally work from home.

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. When it comes to salary benchmarking, the individual is not an affecting factor as their salary is determined by statistics. This makes for a fairer working environment which will be another feature of your business that attracts prospective employees.

It enables equal opportunities

Some companies may be guilty of imposing bias when assigning salaries to certain individuals. When it comes to salary benchmarking, the individual is not an affecting factor as their salary is determined by statistics. This makes for a fairer working environment which will be another feature of your business that attracts prospective employees. 

Salary benchmarking with Paydata

For more information about the process of salary benchmarking, get in touch with Paydata today. Our team of specialists can provide you with any information regarding salary benchmarking, assist you in establishing your requirements, and collect the data that you need to benchmark salaries.

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