How do you compare? Why salary benchmarking is important for growthDid you know one of the best ways for companies to improve their attraction and retention is through salary benchmarking?
In today's job market, attracting and retaining top talent is more important than ever. 63% of recruiters say talent shortage is their biggest problem. And, according to a study, 87% of human resources leaders are placing employee retention at the very top of their priority list for the next few years.
But did you know one of the best ways for companies to improve their attraction and retention is through salary benchmarking? By taking time to research and compare their salaries and benefits packages against industry standards and their competition, organisations can ensure they’re offering competitive compensation packages to potential and current employees.
In this article, we’ll explore salary benchmarking and how it can help your business to thrive.
What is salary benchmarking?
Let’s start with the basics. Salary benchmarking is the process of comparing an organisation's salaries and benefits against those of its competitors. This involves collecting data on compensation packages, including salaries, bonuses, and benefits, and analysing the results to determine how the company stacks up against its peers.
Why is salary benchmarking important?
Offering competitive salaries and benefits is one of the most effective ways to attract and retain top talent. When employees feel that they are being fairly compensated for their work, they’re more likely to remain loyal and motivated. On the other hand, if employees don’t feel they’re being paid what they’re worth, they may be more likely to leave for a higher-paying job.
How to use salary benchmarking to attract and retain top talent
Ready to benchmark your salaries against the market? Here’s how to get started.
(1) Identify relevant competitors
The first step in salary benchmarking is to identify your relevant competitors. These may include companies that are similar in size, location, or industry to you. It’s important to choose a broad enough range of competitors to ensure that your analysis is comprehensive.
(2) Collect data on compensation packages
Once you’ve identified your competitors, the next step is to collect data on their compensation packages. This may involve gathering information from job postings, online surveys, or industry reports. Remember to collect data on a wide range of positions and levels within the different organisations to ensure that your analysis is as accurate as it can be. Detail all responsibilities for each role to make sure that they’re actually comparable, despite perhaps having different titles. And remember, if partnering with a recruitment agency, they’ll be able to provide competitor analysis and market data – just ask!
Don’t forget to look at additional benefits too: bonuses, medical cover, insurances, and pensions all contribute to the overall take-home.
(3) Analyse the data and make adjustments
Once you’ve collected the data, the next step is to analyse it. Are there correlations? And more importantly, can you see any big anomalies in your salaries/packages when comparing them to others’?
Make adjustments to your organisation's compensation packages as necessary. This may involve increasing salaries for certain positions, adjusting benefits packages, or re-evaluating bonuses and incentives. Define salary ranges for each role according to experience levels, qualifications, etc.
(4) Communicate changes to employees
It’s really important to communicate any changes to employees. This may involve announcing salary increases, explaining new benefit packages, or discussing changes to bonuses and incentives. Clear communication is essential to ensuring that employees understand their compensation packages and feel valued by your organisation.
(5) Consider culture too
OK, so strictly not part of the salary benchmarking process itself…but, definitely a consideration. A study by Workbuzz found that almost half (45%) of UK employees and business leaders rank a “great” culture as the most important factor when looking for a new job.
So, if you find you’re still struggling to attract and retain talent despite having aligned your compensation packages with the current market rates, try looking to culture. Create an internal culture survey and ask your employees to complete it to gain important insight into how valued they feel. Carry out similar analysis on your competitors’ cultures, environments, and working styles and see how you compare. But don’t just stop there, make sure you’re doing regular 1-2-1 reviews with your employees to make sure they feel supported, valued and that their work is important.
Salary benchmarking is a critical tool in attracting and retaining top talent. Benchmarking will help you to pay employees fairly and to remain competitive in your industry. Comparing compensation packages to industry standards is the only way you can be sure you’re offering competitive salaries and benefits that are attractive to prospective employees – and that are worth people staying with you for the long term.
At Apollo Solutions, we help clients to better navigate recruitment and retention. We’re deeply embedded into the Corporate Governance and Technology markets in the UK, EU and US, so we’re able to advise on market conditions to ensure you remain competitive. Ready to see how you fare against your competition? Get in touch to find out more.