What is salary benchmarking?
Salary benchmarking is a term used to describe the process of reviewing positions against external jobs, with similar responsibilities, to ascertain what typical market rates are for that role. This process can occur at any stage within the employment relationship however, it is most common during the recruitment stage.
Why is salary benchmarking important?
Employees are an investment. Paying salaries that makes an employee feel rewarded and engaged will ensure business owners get the best return from their investment. Salary benchmarking is a tool used to identify whether the salary business owners are offering is within a range that will enable them to attract new talent and retain their existing employees. Undertaking a salary benchmarking exercise will help businesses gain a solid understanding of where their compensation sits in the market, and the information needed to set a fair and effective remuneration and reward package.
Offering a remuneration package that is fair and effective is important as it will help business owners stand out against any competitors when attracting new employees, and help 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?
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.
Although it is important to do salary benchmarking during the recruitment process, it is also important to do it for existing staff members. Recruitment is an expensive and time-consuming process so businesses will want to make sure they’re retaining their employees. 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
- Staff are requesting pay increases
- New employees are leaving within the first 3 months
- Job offers are being declined
How is a salary benchmarking exercise performed?
When doing a salary benchmarking exercise, we assess the businesses current position in the market. This may include how many staff there are, the main purpose of the business, any competitors, the main responsibilities of the specific role, the experience required to perform the role, and niche skills and knowledge required to perform the role. Using all of this information, we 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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