4 ways salary benchmarking can help your talent retention strategy
Salary benchmarking is a vital component of a talent retention strategy, but often retaining talent is ignored by the c-suite until it becomes an insurmountable business challenge.
Many organisations simply accept high employee turnover and focus on other business needs. However, HR professionals truly understand the importance of retaining good staff, in fact a third of HR professionals view employee retention as one of their key priorities.
Unfortunately, most organisations do not have a formal talent retention strategy. Often, organisations only shift their focus towards employee retention when employees start to leave and turnover figures go up,but by that time it is too late and very little can be done to change their mind.
It is important to have a talent retention strategy and measure its effectiveness through measures such as employee turnover, promotions and employee engagement. There is no better way for HR to build credibility with the business than through regular reporting and data analysis.
There are many reasons why employees leave and some can be easily avoided by proactive practices and effective communication. One way of countering many long-term retention risks is through a regular salary benchmarking exercise. Here are four ways in which pay benchmarking and a pay policy can help your talent retention strategy:
Good market data for leaders
HR is often guilty creating processes and policies without necessarily adding value to the business. What leaders really value is market insight and guidance. By providing this insight, you can empower your leaders to make more informed decisions and be confident that they are treating their employees fairly when making pay decisions.
Lagging behind the market
The salaries for some jobs can rise quickly due to a skills shortage or a change in legislation leading to increase in demand for certain skills. It is important to be proactive and keep track of the market on a regular basis. There is a great deal of salary information available to candidates on the internet and if it’s clear to them that they are well below their market value, it won’t be long before they begin to actively search for new opportunities.
Challenging employees and advertised salaries
Having a talent retention strategy does not mean agreeing to a pay increase every time an employee requests one or threatens to leave. Employees often quote high advertised salaries to justify a pay increase. Firstly, advertised salaries indicate what companies are willing to pay for the perfect candidate and not necessarily what they end up paying. More importantly, HR and leaders should be making informed decisions based on market statistics (median, lower and upper quartile) rather than tracking the salaries of one or two of their high paying competitors.
Pay perception is key
When it comes to pay and reward, communication and employees’ perception is just as important as your pay strategy. You need to ensure there is a clear communication strategy and by investing in market research and analysis, setting clear guidelines and a pay strategy you can demonstrate to your employees that you are committed to looking after your people in the same way they are committed to your business. Pay decisions should be made based on a combination of market insight and sound judgement. Not just ‘gut feeling’.