Everything you need to know about salary benchmarking
Estimated Read Time: 4 minutes
There’s no doubt the market is changing rapidly, and as the war for talent continues, employers must be in touch with how their salaries match up against the wider market to remain competitive.
While annual check-ins may once have been acceptable, today, it is not enough.
So how do you stay informed on what your competitors are paying, and the current market rate, to ensure you can attract and retain the highest quality talent?
The answer is salary benchmarking.
Read on to find out what it is, why it’s important and how you can do it better.
Related: Effective retention strategies beyond a salary increase
What is salary benchmarking?
Salary benchmarking is a process whereby you compare the existing salaries you offer against the salaries offered in external jobs with a similar job description and responsibilities.
This involves gathering data on internal salaries, the current market rates and the pay and benefits employees are receiving elsewhere, to see whether you are in line with expectations.
Related: Should I put my expected salary in my resume?
Why is it important?
With the high demand for top talent in Australia right now, quality candidates can afford to be selective when deciding on their next career move.
While there are many factors they will consider when deciding if they will accept a position, such as the company culture, workplace conditions and the job itself, there’s no denying that the salary offered is often the most important.
But it’s not just new talent who are comparing salary packages – existing employees are also aware of the many opportunities available right now.
If they feel they are not valued, and are not being rewarded for their efforts, it may prompt them to start looking at other options.
Salary benchmarking provides the vital information you need to know about the market rate and how your salaries stack up against your competitors.
This gives you the confidence, insight and competitive edge you need to offer salaries that are just right, so you can attract the best new talent to your organisation and retain your existing high-performing team members too.
How to do salary benchmarking for your organisation
It’s clear that now, more than ever, you need up to the minute, accurate advice on the salaries on offer within your industry and the various roles within your organisation.
Without it, you risk losing existing talent and missing the opportunity to secure your next star recruit.
The good news is, it can be really fast and easy to find the information you need to know – if you know where to look.
Below is an explanation on how to do salary benchmarking for your organisation, with tips that can help you save time, money and effort:
1. Create a database of internal roles
The first step is to create a list of every position within your organisation.
Be sure to include the current salary (including additional benefits and entitlements) and an individual job description that outlines the tasks, responsibilities and qualifications required for each.
2. Access current competitor and market data
The quality of the data you use will directly impact the accuracy of your benchmarking, so be sure to get your information from a reputable source.
For example, the Robert Half Salary Guide is packed with up to date market insights including starting salary ranges, benefits and hiring trends for over 200 positions within the finance, technology, business support and marketing sectors.
3. Analyse employee compensation
Once you have the data you need, you can compare your internal salaries with competitors and the current market to learn where you sit.
It’s important to note that this step also requires you to consider your company’s current performance, budget for employee wages and philosophy on how to reward employee effort.
A combination of accurate internal data on existing wages, quality current data on what the market is paying and a solid understanding of the position and values of your organisation is the foundation for effective salary benchmarking.
Related: Does money talk over non-salary benefits?
"Businesses that are serious about retaining their staff should be regularly benchmarking salaries across the organisation and maintaining a clear and transparent dialogue with each of their employees about their salary and role expectations. Ensuring existing staff are rewarded at the same rate as new employees could significantly reduce the risk of losing crucial knowledge and experience to more competitive external offers," said David Jones, Senior Managing Director Robert Half Asia Pacific.
Feel overwhelmed? You don’t have to do it alone
After reading about how to do salary benchmarking, you may feel like there is a lot of time and effort involved in the process.
Thankfully our team can offer the data and insight you need to set your salary in the right percentile, so you can attract and retain the quality staff you need for business success.
Access our Salary Guide to find out all the numbers you need to know to get started on your salary benchmarking.
