Salary benchmarking is the process of reviewing positions within the business against external jobs with similar responsibilities, to work out what the typical market rates are for that particular role. This process can occur at any stage within the employee lifecycle although it is most common during the recruitment stage.
Employees are an investment and paying salaries that reflect this sentiment means that workers feel fairly rewarded financially, leading to increased employee engagement. Ultimately, this helps to ensure business owners get the best return from their investment.
Salary benchmarking is used to identify whether the salary business owners are offering is within a range that will attract new talent and retain those workers already in the business. Undertaking salary benchmarking not only helps managers to better understand how the business fairs within the market, but also provides important data to ensure a fair and effective remuneration and reward package is offered to its employees.
In a tough labour market, offering a competitive remuneration package helps businesses stand out against any competitors when trying to attract new employees, and helps existing employees feel engaged and committed to the business, reducing turnover and cultural issues. Salary benchmarking will also assist businesses in financial planning, knowing what the market rate of salaries are and if the business can afford the investment.
How often should salary benchmarking be done?
Best practice says that salary benchmarking should be completed during every recruitment process to ensure businesses are attracting solid candidates. Business owners will also want to do salary benchmarking during the recruitment process to ensure that when it comes time to offer a candidate a position, they actually accept the role. There is nothing more disheartening than going through a full recruitment process only for the new employee to decline a job offer a the end.
Just as is important is undertaking salary benchmarking for existing employees. Recruitment is an expensive and time-consuming process and business owners should ensure retaining valuable workers already at the business is a top priority. Many businesses choose to do salary benchmarking as part of the employee’s annual performance review however, salary benchmarking can take place at any stage during the employee lifecycle.
If any of the below behaviours are being displayed, it may be a good idea to do a salary benchmarking exercise:
- Engagement has dropped
- Turnover has increased
- Absenteeism has increased
- Workers are requesting pay increases
- New employees are leaving within the first 3 months
- Job offers are being declined
How is a salary benchmarking performed?
Salary benchmarking involves assessing a business’s current position in the market. This may include the number of current employees, the main purpose of the business, any competitors, the main responsibilities of the specific role, the experience required to perform the role including niche skills and knowledge required to perform the duties involved.
This information is used to review similar positions at other organisations and provide a range that the salary should fall within. Typically, a salary that falls outside of this range may result in increased turnover, engagement issues, absenteeism, or jobs not being accepted.
If you’re looking for assistance in undertaking salary benchmarking or developing a remuneration review process, don’t hesitate to get in touch with our team, via the chat box here or calling us on 08 6150 0043.
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