Salary Benchmarking: 3 Reasons Every Org Should Do It
Salary benchmarking, also known as compensation benchmarking, is an instrumental part of both an organization’s competitiveness and growth in the marketplace. This thorough analysis of employee salaries and where they fall in the marketplace should be performed annually prior to setting the budget for the following year. Having salary data from across businesses and industries allows an organization to know exactly where they stand, take into consideration any adjustments that are needed to their current offerings, and how to budget accordingly for changes.
Do you know where your business stands in terms of salary competitiveness?
While there are many benefits to performing salary benchmarking, here are the top three reasons why you should consider doing this analysis every year:
Reason 1: Reduce turnover and increase employee satisfaction (and retention). The truth is, employees have a general awareness of how their pay aligns with others in the same position within the company and in the market overall. By ensuring your overall salary package (including benefits) is competitive with similar organizations and positions within your industry, your employees will not only feel appreciated but will be more inclined to stay at their current position versus looking elsewhere for a similar job with higher pay.
Reason 2: Increased competitiveness (and attractiveness) in the marketplace. Top talent is at a premium these days, and many organizations are all fighting for the same prospective hires. A salary benchmarking analysis gives you the information needed to better understand what other companies are paying, and what benefits and bonuses they are including in their packages. Armed with this information, you are better able to offer your prospective hires a salary package that is similar (or slightly better) than other organizations, which puts you at a hiring advantage.
Reason 3: Better overall budgeting and forecasting strategies. A thorough salary analysis at the beginning of every budgeting season gives you a better idea of where your company stands and what adjustments need to be made over the year. This knowledge also helps ensure you are not overpaying employees, helping to decrease operating costs. Not to mention, when your organization is offering competitive salary packages, you are not only able to hire with more confidence, but are more likely to increase retention, ultimately saving on hiring and onboarding costs.
How to get started
While there are many reports available that provide salary data analysis across the marketplace, these can be expensive. Not to mention, the time needed to analyze and make accurate recommendations can be overwhelming to an already busy human resources team. Pulling in an expert, such as Compensation Works, can ease the burden on your team and provide knowledgeable insights and recommendations to where your organization needs to make adjustments to salaries to remain competitive. Our consultants walk you through a nine-step process to evaluate, recommend and implement a competitive salary strategy.
Ready to learn more?