What is salary benchmarking?

4 Mar 24 | Blog

Salary benchmarking is about comparing your organisation’s salaries to similar roles in different companies, usually factoring in which industry you’re in. It’s a way of understanding if you’re offering the right compensation.

Money makes the world go round. Your employees are looking for a value exchange, when they spend however-many-hours working for you. Because no-one works for free – even charity volunteers are getting a sense of satisfaction from giving back (and that’s not a bad thing!).

But however much you appreciate your workers, budgets are a reality. That’s where benchmarking salaries comes in…

What is a salary benchmark?

A salary benchmark is something to compare an internal salary against, to see if you’re meeting the market rate. It’s often based on several external sources – factoring in geography, industry, and seniority to make sure it’s completely relevant.

Why benchmark salary?

  • 74% of employees say pay transparency matters, and salary benchmarking means you can be comfortable about not hiding your pay scale
  • It helps you set realistic budgets when hiring new staff (and be confident about advertising those salary ranges too)
  • If you know you can’t meet the benchmark, you know you need to offer other types of compensation – like extra perks or flexibility

How does salary benchmarking work?

As with any data analysis project, salary benchmarking isn’t always easy. Anything involving multiple sources of data, different variables, and such sensitive information is bound to be complex. So if you want to do salary benchmarking, you need a process.

Here’s a few steps you might want to take:

  • Collect data about salaries: there’s lots of ways to do this, from acquiring a database to manually trawling through the internet. Decide what works best for you, and consider the need for accuracy in this step
  • Think about job titles: HR Director vs Chief Happiness Officer? It’s a cliche, but job titles can differ – so you need to understand job function and job seniority, so things don’t get too confusing down the line
  • Factor in size & industry: a start-up and a multinational company aren’t going to pay the same wages, obviously. And charities will pay less than the finance sector – so you need to factor all this in
  • Find the salary range: once you’ve got all the data, and factored every variable in, you can understand the total salary range of the role you’re benchmarking – from the lowest paid to the highest
  • See where you sit: now it’s time to look within – measure where your current salaries sit on that sliding scale, to understand if you’re meeting market rate, exceeding it, or falling far below it

A word of warning…

Don’t underestimate the importance of data being accurate, relevant, and up-to-date. Without this at the heart of your benchmarking exercise, it’s all going to fall apart.

Benchmarking salaries with Qlearsite

Sign up for free here

We know salary benchmarking is incredibly complex, and increasingly important. That’s why we’re offering it in our HR analytics platform. Alongside trends and predictions about your people data, and attrition and gender ratio benchmarking, we’re also introducing salary benchmarking.

Sign up for Qlearsite free, and upgrade to Pro for access to a salary benchmarking tool that can make your life easier, and your organisation more successful.

Why use Qlearsite?

We integrate with 50+ HR platforms, and will offer salary benchmarking data you can trust – combining those two data sources in a fast, low-effort, and easy-to-interpret way.

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