Reward Director Rameez Kaleem offers reward advice to businesses by answering the question: why benchmark salaries?

Reward advice is useful, but having market intelligence as well as a good understanding of where your organisation sits in relation to the market is essential in order to set an effective reward strategy. This will enable you to recruit new employees at the right salary and ensure you are rewarding your existing employees appropriately in order to retain your key talent.

With a wealth of information available for free through recruitment agencies and online forums, employees are more informed than ever about market rates of pay for their roles. In order to compete for talent and retain key people in the long run, your organisation must not only develop fair and market competitive salary ranges but review them on a regular basis to ensure you are keeping up with the market.

What Are Your Compensation Objectives?

Pay and reward advice is available from a professional Pay & Reward Consultant like 3R – but even if you don’t work with a consultant, every business should have a reward strategy.

Does your organisation have a reward strategy? Is your reward strategy linked to your business objectives? If so, you are likely to have a clear idea of what you are looking to get out of benchmarking salaries in your organisation. Your reward strategy should answer key questions such as:

  • Who are your competitors?
  • Do you want to be a market median payer or, for example, lead the market?
  • How does base salary fit into your overall reward strategy in relation to, for example, bonus or benefits?

Are you looking to drive high performance or is retention your top priority?

Choosing the Market Data

The market data you use is the first and possibly the most crucial step. Any salary benchmarking process should engage with the business from the very start. If the right data sources are not used you may end up carrying out an extensive exercise which lacks credibility as the business and line managers do not trust the data.

Building credibility with the business and line managers can be a challenge so it is important that you understand how market surveys work. You should be able to clearly articulate how the data is collected, whether data is aged, geographical coverage as well as how the final output is calculated. After all, this data will have an impact on the pay decisions managers make in the annual review process or when recruiting or promoting team members. If they don’t trust the data that is being provided to them then it is very unlikely that you will be able to influence their decisions and coach them.

Challenging Recruitment Salary Data

As an HR professional you will become accustomed to being inundated with recruitment salary surveys and job adverts from managers challenging the market data or employees challenging their own salaries. When looking at this information it is important to consider the following:

1. There are a wide range of salaries being advertised on the internet for each role. The employee will inevitably pick out the highest paid salaries. Organisations must make decisions based on in-depth market research and analysis rather than anecdotal data from a handful of companies

2. Job adverts and recruitment data tend to show what companies are willing to pay for positions in their company rather than what they are actually paying. For example, a role may be advertised with a salary of ‘up to £50K’ but the actually salary offered to the successful candidate may be significantly lower

3. Recruitment and job advert data is not robust and often based around job titles only. They don’t tend to undergo a job evaluation and data cleaning process. For example, a finance analyst in one company may be equivalent to a finance manager in another. A good salary survey will look at the content of the roles and try to ensure that we are looking at equivalent roles when establishing salary ranges rather than equivalent job titles.

Comparing Apples with Oranges!

Why Benchmark Salaries?

Getting your salaries right could be the key to attracting and retaining some key people in your organisation. Given the potential impact, investing in a good primary data source is essential.

If you would like to discuss salary benchmarking in your organisation, or need general reward advice, please get in touch with us at

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