Let’s get familiar:

Why Salary Benchmarking Is Important

With a wealth of free information at their fingertips, employees are more informed than ever about market rates of pay for their roles.

Having market intelligence, as well as a good understanding of where your organisation sits in relation to the market, is essential to setting an effective reward strategy. To compete for talent and retain key people, your organisation must not only develop fair and market-competitive salary ranges but review them on a regular basis.

Choosing Credible Data

Choosing the right market data is the first – and possibly most important – step in the salary benchmarking process. Building credibility 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 it is aged
  • Geographical coverage
  • How the final output is calculated

This data will ultimately impact managers’ pay decisions. If they don’t trust the data, it is unlikely that you will be able to coach and influence them, rendering the whole process a wasted effort.

Objectively Assessing the Data

HR professionals are used to being inundated with salary surveys and job ads. When looking at this information, it’s important to keep in mind that:

  • Employees will inevitably present examples with the highest paid salaries
  • Job ads and recruitment data tend to show what companies are willing to pay, rather than what they are actually
  • Recruitment data is not robust and is often based on job titles rather than what the roles actually entails

Getting salaries right is critical to attracting and retaining key people in your organisation, which is why it pays to invest in a good primary data source.

Where Job Levelling Fits In

Most salary surveys have a job levelling structure that presents a series of progressively senior roles distinguished by knowledge, skills and competencies.

If your organisation already has a job levelling framework, the next step is to establish a link between your organisational levels and the levels in the survey data you have chosen. If you don’t, then the process becomes a bit more complex. To begin, you will need profiles and organisation charts for all the roles you are looking to benchmark, which may need reviewing if they are out of date.

Presenting the Data

Perhaps the simplest and most effective way to present your salary benchmark data is by showing the compa-ratio for each employee. Compa-ratio is the employee’s current salary divided by the current market rate for that role – as defined by the salary surveys you are using. Presenting reports in this way gives managers just the right amount of detail and helps them to make more informed pay decisions.

Whether you present your salary benchmark data using compa-ratios or in any other way, it is crucial that you run training sessions with your managers to give them an understanding of the data, as well as the job evaluation process. Simply sending a pay report to managers without prior training can have an adverse effect; they can only make informed decisions if they have a good understanding of the data and confidence in the process.

Download our salary benchmarking whitepaper for a comprehensive guide to developing fair and market-competitive salary ranges.

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Written by Jenna Thompson 


3R Strategy is an independent reward consultancy helping organisations to build a culture of trust through pay transparency. Book a free discovery call with us today.