A somewhat daunting yet vital task with the importance being misunderstood in most companies that do not have an HR resource.
Salary benchmarking is the process of identifying the market rate of each role within your company by comparing and matching internal job descriptions to external jobs with similar responsibilities.
There are various factors and actions to take into consideration by any organisation when completing salary benchmarking from choosing salary benchmarking data sources to getting buy-in at the corporate level. Hold fire though, before you start making calls, comparing data sources and getting others involved there is one crucial step you can take to produce the best possible results: create a salary benchmarking plan. And here at Grasp, we have created a free downloadable guide on how to create this salary benchmarking plan. Keep reading this article to get some general information about Salary Benchmarking.
Benefits of salary benchmarking
- Attract and retain talent
- Create and maintain competitive advantage
- Manage the bottom line
- Maintain company reputation and employer brand
- Creates a transparent view for employees of how their salary has been identified
- Time consuming, resource heavy task
- Costs involved
The salary benchmarking plan will ensure money is wisely spent throughout the project. It will also identify the scope of your project listing an overview of what you hope to achieve from your salary benchmarking.
How to create a salary benchmarking plan:
- Complete job descriptions
When salary benchmarking, it is not enough just to match job titles alone. Responsibilities, experience and education/qualifications all factor into an accurate salary.
- Understand your purpose
Why are you are performing a salary benchmarking project? Reasons could be an annual review, a team who is over or under paid, retention of staff or difficulty in hiring fresh talent into a particular area of the business
- Establish your goals
You should have 1 to 5 primary objectives for salary benchmarking, these objectives will likely come from a leader within your organisation or your HR team. An example would be reducing management pay by 10% in the next 18 months. The more specific the goal the better, bearing in mind that these goals will measure the success of your salary benchmarking project.
- Outline your budget and resource needs
Identify what parts of the project you can manage in house, the 2 major costs of salary benchmarking are access to data and HR consultant time. If you need to hire an external consultant to help fully understand the fees involved and what is included before committing. Take time to research what the costs will be to budget effectively.
- Create your timeline
With your goals in mind you can create a timeline for your salary benchmarking project. Remember to detail expected time and milestones for each action. Inevitably throughout your salary benchmarking project you will subject to unexpected projects and daily tasks so its recommended to add a few weeks to your salary benchmarking project to account for these delays.