It’s common to wonder if we’re paying our employees enough or if we’re competitive in the job market. Not only is this important for attraction and retention, but with a new government pledging to follow the EU more closely, being transparent about pay and conducting salary benchmarking in the UK is going to be even more crucial.
Salary surveys are a key part of this process. They’re the perfect source of information that can help us make smart decisions about pay and benefits.
Importance of Market Data
Salary surveys give us a peek into what’s happening in the job market. They provide us with detailed pay benchmarking data that takes the guesswork out of setting pay. Instead of relying on gut feelings or outdated information, we can use this data to make informed decisions.
Attraction & Retention
When we’re trying to attract and keep great people, our salary offerings are one of the key factors. We know many are still struggling with the cost of living, and as the real living wage increases we should look to ensure our pay is favourable as well as affordable.
Salary surveys help us understand how our pay levels stack up against others in our sector. This insight is invaluable when we’re trying to put together a competitive package that will make talented folks want to join our team and stick around.
It’s worth noting that many studies show charity and public sector pay rises have typically lagged behind those in the private sector. This can make it tricky to find talent at a salary that’s both affordable and competitive.
Over time, we’ve seen many organisations turn to non-pay-related benefits to sweeten the deal. Things like flexible working, childcare support and wellbeing benefits can help create a supportive culture and contribute towards retaining key team members and attracting new ones.
Become a Pay & Reward Academy member to find tonnes of benefits providers on our marketplace!
Understanding Benchmarking Data
Salary benchmarking in the UK is about looking at how our pay compares to what other organisations are offering for similar roles.
Let’s break it down into some key areas.
What Do the Terms Mean?
Median
When we’re looking at salary data, we often come across terms like ‘median’ or ‘quartile’. The median is the middle point of all the data in our sample. It’s a good starting point because it gives us a fair idea of what’s typical in the market.
For example, let’s say 11 organisations have a marketing director role. If we rank these salaries from lowest to highest, the organisation that sits in the middle (ranked 6th) is the median salary.
Quartiles & Deciles
Most salary surveys publish lower (25th percentile) and upper (75th percentile) quartiles, as well as the market median.
The best way to think about this is to imagine a data set of 100 employees, each with a unique salary. These salaries are placed in order from the lowest to the highest. The 25th highest salary in the sample is the lower quartile. The 75th highest salary in the sample is the upper quartile.
Some surveys may also publish deciles to provide even more in-depth insights. Deciles sort data into ten parts. The 10th highest salary is the 1st decile. The 90th highest salary is the 9th decile.
Analysing Market Positioning
Now, let’s talk about where we sit in the market. Are we currently paying above, below, or right on the money compared to our competitors? And where do we want to sit in the future?
This is crucial because it affects how we attract and keep talent.
We need to consider a few things here:
- Location: Pay can vary a lot depending on where we’re based. London salaries, for instance, are often higher than the rest of the UK due to the cost of living.
- Industry: Different sectors will have varying budgets and pay levels. We need to make sure we’re comparing ourselves to the sector we sit in.
- Company size: Bigger companies might be able to offer more, so we need to also ensure we’re looking at data from organisations of a similar size to us.
It’s also worth noting that job titles can be a bit misleading and often mean different things in different places. For this reason, it’s important to look beyond the title and focus on the actual job responsibilities when we’re conducting salary benchmarking.
Developing Pay Ranges
Once we’ve got all this data, we can start developing our pay ranges.
Here’s how we might approach it:
- Set a minimum and maximum for each role based on our market analysis.
- Consider factors like experience and skills when deciding where in the range someone should sit.
- Decide how pay may progress within each level. What factors or behaviours will we expect from each individual in a role as they develop their career?
- Think about other forms of reward too, not just base salary. Things like bonuses, shares, and benefits can make a big difference to the overall package. Will this vary between pay ranges?
We also need to think about how often we’ll review these ranges. The market’s always changing, so we might want to look at them once or twice a year to make sure we’re still competitive.
Remember, it’s not just about matching what everyone else is doing. We need to think about our own business goals too. If we’re trying to grow rapidly, we might need to offer more to attract top talent. On the flip side, if we’re in a tough spot financially, we might need to get creative with other benefits to make up for lower salaries.
Choosing the Right Salary Survey
When it comes to picking the perfect salary survey for our organisation, we’ve got a few things to consider. Let’s dive in and explore the key factors that’ll help us make the right choice.
Industry-Specific vs. General Surveys
First up, we need to decide whether we want to go for an industry-specific survey or a general one. Both have their pros and cons, so let’s break it down.
General industry surveys give us a broad view of the market. They’re great for common jobs like IT, Accounting, Marketing, or Human Resources. These surveys often let us narrow down the data by industry, company size, or location. For example, the Mercer Benchmark Database covers over 40,000 organisations worldwide. This includes over 400,000 jobs at all levels.
On the flip side, industry-specific surveys focus on jobs unique to our sector. Think nurses in healthcare or engineers in tech. These surveys might have fewer participants overall, but they often provide more relevant data for our specific needs. They can offer:
- More statistically significant data for our industry
- Job descriptions that better match our roles
- Information on industry-specific pay practices
Tip: We might want to use both types. We could use general surveys for roles like HR and marketing, and industry-specific ones for our core functions. It’s all about finding the right mix for our needs.
Evaluating Survey Providers
Now, let’s figure out how to choose a survey provider. Here are some key things to look out for:
- Participant list: Most providers will show us who else is taking part. This helps us see if our competitors are involved and gives us an idea of the survey size.
- Methodology: Each provider has their own way of doing things. We should ask about their process, how they ensure data accuracy and how much support they offer during the process.
- Job matching: We need to make sure the survey’s job descriptions align with our roles. Some providers offer support with this, which can be super helpful.
- Data delivery: Will we get the results in Excel, PDF, or through an online tool? We need to make sure it fits with how we work.
- Timing: Can we get the results in time for our pay review process? This is crucial for making timely decisions. Most surveys will also have an ‘effective date’ which indicates the cut-off date for data submissions. This is a good indication of how up to date the data in the survey will be.
- Filtering options: Can we slice and dice the data based on factors like region or company size? This flexibility can be really useful.
Cost Considerations
Let’s talk money. The cost of salary surveys can vary quite a bit. Here’s what we need to keep in mind:
- Survey size and depth: Generally, larger and more detailed surveys cost more. But they might offer better value if they cover all the info we need.
- Additional services: Some providers throw in extra goodies like supplementary surveys on benefits or HR practices. Others might offer networking opportunities, additional resources or support with aspects such as job levelling and matching into the survey’s job model.
- Geographical coverage: If we’re spread across different countries, we might want a provider who can support us globally. Some offer discounts for multiple purchases, which could save us some cash.
- Participation vs. purchase: Sometimes, it’s cheaper (or even free) to get the survey results if we participate by submitting our own data. It takes more time and effort, but it is usually worth it financially.
Remember, the cheapest option isn’t always the best. We need to weigh up the cost against the quality and relevance of the data we’ll get. After all, making informed decisions about salaries can have a big impact on our ability to attract and retain top talent.
Salary Benchmarking in the UK
Alright, let’s dive into how we can put a salary benchmarking process into action. It’s not as daunting as it might seem, and we’ll break it down into manageable steps.
Gathering Internal Data
First things first, we need to collect all the relevant internal data we have. Here’s what we need to focus on:
- Job families: We need to group our roles into functions or departments that mirror the survey’s job model. This helps us compare apples to apples when we look at external data.
- Levels and sub-levels: We need to consider how senior each role is and the scope of responsibility it covers. We also want to look at how established someone is in their role.
- Location: Where are our employees based? This can have a big impact on salary expectations.
- Current salaries: Of course, we need to know what we’re currently paying on a full time (FTE) basis.
By organising our internal data this way, we’re setting ourselves up for success in the next steps.
Matching Jobs to Survey Data
Now comes the tricky part – matching our jobs to external survey data. This is where we need to be careful to ensure we’re making fair comparisons. As a pay and reward consultancy, we often do this on behalf of our clients and then hold a calibration meeting to agree upon our matching.
This saves the organisation time and makes sure the matching is as accurate as possible when carried out by our experts.
When selecting our benchmarking data sources, we should ask ourselves:
- Does the publisher provide data on jobs that are relevant to our organisation?
- Is their job-matching approach robust?
- How easy will it be for us to match our jobs to their data?
- Are the other participants in the survey relevant to our organisation?
- Is the salary benchmarking report easy to use and does it provide the data we’re looking for?
Analysing & Presenting Results
Once we’ve got all our data, it’s time to make sense of it all. Here’s how we can approach this:
- Look at different elements: Most sources analyse cash elements separately (base pay, bonuses, etc.) and some combine them into a total compensation figure.
- Be clear about our desired market position: Do we want to pay at the median, above, or below? This will guide our analysis.
- Create pay bands: We should establish minimum, mid-point, and maximum salaries for each level based on the salary benchmarking data.
- Adjust for location: If we’re operating in multiple locations, we might need to create ‘location indexes’ to account for differences.
When we’re presenting our results, it’s crucial to be transparent about our process. We should communicate to our employees that we’ve benchmarked against the wider market to ensure fair and competitive pay. This can help put salary conversations in the context of the overall value we offer as an employer.
Remember, salary benchmarking isn’t a one-and-done process. We should aim to review our data once or twice a year to stay competitive. By following these steps, we can create a robust process that helps us attract and retain top talent while keeping our costs in check.