The Ultimate Guide on Salary Benchmarking

Technology helps big time in this “salary-expectation-estimation” process. The world is data-driven now, and it is readily available. Here’s how technology impacts the negotiation processes.

The decisions HR professionals make are crucial to a company’s growth and employee well-being. One amongst them is salary negotiation. But the negotiations don’t always have to be hard. What if they are beneficial for both parties?

Salary Benchmarking helps individuals make informed decisions and avoid over or underpaying a resource. As the term mentions, “Benchmarking” is a standard set for comparison. While negotiating for salaries, it can be a win-win situation for the employer as well as the employee.

Technology helps big time in this “salary-expectation-estimation” process. The world is data-driven now, and it is readily available. Here’s how technology impacts the negotiation processes-

The Current State of Salary Benchmarking
Benchmarking as a concept is not new to humans. From benchmarking grades to picking out the best colleges, we all have been there and done that. As far as salary benchmarking is concerned, every job seeker does it to understand the market. And so do the companies through assigned HR teams.

Tech has not been an exception for HR. Sourcing,hiring and training programmes are designed according to the market needs. Salary and benefits are designed after tracking employee expectations online. This not only increases employee satisfaction but also affects the employee retention rates.

For organizational success, stakeholders must be up-to-date with salary trends. Business development depends thoroughly on budget planning. Investment in the right elements can assure ROI on talent acquisition. So, salary benchmarking has become a standard global practice for all HR professionals.

Types of Salary Benchmarking

While offering competitive salaries, companies have to take care of their fiscal responsibility. As the HRs take this responsibility, it’s essential to understand the types in Salary Benchmarking:

Internal Benchmarking: This is about understanding the complexity of roles and responsibilities inside a company’s department to decide remuneration. Here the concerning factor is the huge disparity in salaries. This will ensure organizational harmony in the employees.

External Benchmarking: The major difference between internal and external benchmarking is deciding the remuneration by comparing your companies’ salaries with other companies. This brings the blind spots in your organization if any.

Geographical Benchmarking: As the name suggests, the comparisons are made based on your company’s location. Multinational companies are the ones to do this. They have to get the best out of local as well as globally followed policies.

Demand-Supply Gap
The Demand-Supply gap is the difference between current and potential human resources and the skilled workforce needed to achieve business goals.

The world is experiencing “The Great Resignation”. There are multiple openings in the digital arena. But, there is a dearth of skilled resources to fill in the posts. Salary benchmarking assists in understanding the skill sets needed for a particular job. It can help employers bridge the demand-supply gap by investing in upskilling the resources. The training can bring down high salary expectations of individuals.

Typical Process of Analyzing Salary Data

The process of analyzing and building a compensation model will take time and effort. But if done right, it will need revisiting just once or twice a year.

Here’s the way to go about it-

Step 1: Assign roles and levels to everyone in the organization

You can categorize people by job functions, organizational levels, organizational sub-levels, and locations. So, for example, Person X is at a job post of a sales manager. He keeps a track of sales executives. His level of responsibility will be decided based on his experience. And last, the city or country where they are performing their work.

Once you have this information, the comparison of apples to apples and oranges to oranges
will be easier.

Step 2: Gathering Data

Picking up relevant data that you can use is an important step to attract and retain talent. There are multiple sources that you can use while you research. BLS,, CareerBuilder, PayScale, The Riley Guide are some of the sources you can use. The age of data is vital in determining relevance for the assigned roles.

Sometimes, you won’t find enough information. But make the most of the given filters and look at different ranges while you are at it.

Step 3: Apply the Data to the Assigned Roles and Levels

A thorough examination of the data and percentiles will reveal where your salaries stand concerning your preferred position. This does not imply that it’s what you must pay. It is your responsibility as an organization to create a reward package, while also being competitive in attracting and retaining the type of talent your team requires.

Market is full with salary benchmarking studies. There are paid and free solutions catering to the needs of employers/employees. It is available with information on benefits, pay bonuses, downloadable reports and much more. The transition from manual to an automated version of benchmarking is getting the spotlight.

Pay Transparency Initiatives and Programs
When skills lose value in the labor market, you may end up overpaying people for work that is no longer in demand.
Using a professional salary survey ensures that you are using accurate salary data directly from payroll, matching the role description and content.

Salary setting could result in internal pay disparity based on the negotiations that occur during the hiring process. Also, the uncertainty and perceptions of unfairness in reward strategies can increase the risk of equal pay claims. Your employees will be less likely to question their pay if they understand the reward structure. Thus, pay transparency initiatives and programs can help you with the same.

Final Words

Technology has evolved the HR domain and transformed the way people work and get remunerated. Here, the captivating factor is the data and appropriate use of information available. Benchmarking gets good results for your organization if done with the right intention. It will not only increase employee satisfaction but also help in the strong establishment of your company.

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