Did you know that 62% of all employers are considering or beginning to disclose pay rate information?
With a growing number of employers adopting this practice, a growing number of applicants and employees expect to see current market salaries attached to the work they perform.
This means that to stay competitive in today’s employment environment, the job salaries you offer need to be on par with (or better than) the standard roles and responsibilities of them.
The question is, how can you be certain that, within your company, wage matches work?
The answer – By implementing salary benchmarking as a strategy to compare, evaluate, and allocate standard rates to applicable roles.
Here at Combined, our expert HR team has assisted many employers with the process of salary benchmarking. So, we understand that it can be a difficult process to navigate. We are here to walk you through exactly how to benchmark your employees’ salaries.
In this article, we will explore how salary benchmarking can be a great tool to ensure that your workforce pay scales correctly correspond to workplace positions.
By reading it, you’ll learn the 7 steps to successful salary benchmarking.
What is salary benchmarking?
Salary Benchmarking is a way to determine that your employees are paid fairly and equitably for the work they perform. It is the process of comparing your company's job descriptions and pay ranges to those from other similar organizations in your industry.
By analyzing your internal job positions against pay data from comparable external roles, you can better understand and select suitable current market salaries for them.
7 steps to successful salary benchmarking
These 7 steps can steer you toward successful salary benchmarking and the benefits associated with it.
1. Create your job descriptions with defined roles, responsibilities, and requirements
When salary benchmarking, you compare your job descriptions and pay range to external pay data for similar jobs.
The key word here is “similar.”
To get an accurate measure of the current market salary for a job, your job description has to align with the data you are comparing it to.
What happens if you benchmark a salary without a clear and defined representation of the position?
I’m sure you’ve heard it said, “you can’t compare apples to oranges” – And that is exactly what you’d be at risk of doing.
If the job description you use does not accurately represent the role you are benchmarking, then the benchmark result will be incorrect. To assign a fair and equitable wage to a position, an incorrect benchmark figure is useless.
With this in mind, when developing your job descriptions, make sure that the roles, responsibilities, and requirements are detailed and thorough.
A few questions to ask to develop adequate job descriptions are as follows:
- Does the position require a degree?
- Is the position entry-level or does it require a minimum number of years of experience?
- Does the position require special training or additional certifications?
- Is there hazard exposure associated with the position?
- Does the position supervise other employees?
- Is it a management position?
Factor in these answers and when it’s time to place your job against pay data for others like it, the comparison will be (you guessed it!) similar.
2. Compare your job description to similar external positions
Once your job description is complete, it’s time to evaluate the pay rate for it with other comparable external positions.
And this is where the buzzword, “similar,” comes into play again.
When salary benchmarking, it is important that the external pay data you use reflects all aspects of the position you are comparing it with.
To make sure it does, here are a few factors you should consider:
- Industry
- Company size
- Company location
- Market demand for the position
- Employee education, experience, and qualifications
- Role requirements and responsibilities
By filtering for these factors, the external pay data that you use will closely resemble the position you are benchmarking.
3. Analyze job salary pay data for the position
Now that your internal job description and expected pay match that of the external roles you are comparing it to, it’s almost time to crunch some numbers.
But, first, you want to make sure that you’ve properly sourced the pay data you are using. Whether you collect this information from employer surveys, data-sharing networks, salary software, or a consultant, it is important to validate the quality of it.
Here are a few questions you should ask to assess the quality of your pay data:
- Is your pay data current and correct?
- Is your pay data sourced from a large enough sample?
- Is your pay data geographically relevant to your company’s location?
- Is your pay data reliable and from a reputable source with white papers on the information?
If your pay data checks all of these boxes, you are all set to analyze it against your job description.
By doing this, you will be able to gauge what the standard salary for your internal job should be.
4. Adjust your pay range to reflect job specifics
By analyzing your pay data, you now have a baseline of what the current market wage for your position is.
However, no two positions are exactly alike. And it goes without saying that the salary would not be either.
This time, instead of looking for similarities, you have to isolate and assign value to the differences between your specific and other comparable roles.
So, the next step in the salary benchmarking process is to use your data-driven baseline and build a salary that accounts for any responsibilities or requirements unique to your internal position. When doing this, you can also adjust your pay range to be more competitive.
5. Identify any pay gaps – and close them
Again, the purpose of salary benchmarking is to establish and offer fair and equitable wages for work.
So far, you’ve made sure that your pay scale is fair and comparable to the current market salary for the position.
In order to ensure that it is also equitable, you have to examine pay information across the rest of your company and look for wage gaps. This information should be assessed for any variations in pay.
To perform this assessment, you need to consider:
- How your wage range compares to salary benchmarking information
- If your current staff is being paid a similar market rate as newer employees
- Contributing factors or reasons for any wage gaps
Whether variations are created unintentionally, by bias, or based upon discriminatory factors like gender, race, or disability, they need to be addressed and mediated.
Often, employers don’t realize when pay gaps are present – so this step of salary benchmarking can actually safeguard against wage discrimination.
6. Implement and communicate a compensation plan driven by this data
If you’ve reached this step, you’ve used data to create fair and equitable pay scales for all of your internal positions.
While you know the process of how each figure was reached, your employees don’t. And, outside of simply a number, it is important for your workforce to understand why a specific wage equates with specific work.
By creating a data-driven compensation plan and effectively communicating this information with your employees, you build this understanding.
This plan can also outline a process for salary growth and scalability so that, as your business grows, you have a compensation system that will grow with it.
7. Keep your pay scales current – continue to monitor and update data
Finally, successful salary benchmarking means consistently updating your pay scales to reflect any relevant changes.
By continuing to monitor external data to keep your pay scales current, you can be sure that you allocate standard wages to applicable work.
Take the next steps to implement salary benchmarking successfully
If you are here, you understand the importance of offering fair and equitable wages in today’s competitive job market.
On the surface, it seems an easy enough task to do.
But, the actual process of comparing, evaluating, and allocating current market rates to applicable roles can be complicated.
In this article, you learned 7 simple steps to salary benchmarking that can not only help you navigate this process but can make your task to match wage with work as simple as it seems.
Having assisted many employers with salary benchmarking, our HR specialists at Combined are confident that it can help you bolster your business. And, we can guide you to effectively implement salary benchmarking into your business practices.
This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.
