Salary Benchmarking: The Key to Attract and Retain Top Employees
Your employees are your most valuable resource, and the quality of your staff has a direct impact on the quality of your products and services.
So, it’s important to attract the best possible talent to your company. But how?
The bottom line is this: money talks. To bring in the best talent, you need to be offering the most competitive salaries, and that is what is going to change the end game..
You can establish what a ‘competitive’ salary is through a process called ‘salary benchmarking’. Let’s take a look at what salary benchmarking is and how you can use it to bring the best to your business.
What is Salary Benchmarking?
Salary benchmarking involves matching or exceeding the ‘benchmark’ salary levels across your industry. For example, to benchmark a receptionist’s salary, you’d look at what other receptionists are being paid by your competitors.
To attract the very best candidates, you’d then aim to match or exceed the average.
How to do Salary Benchmarking
1. Pre-implementation Analysis
To benchmark a salary, you need to think less like a recruiter and more like a job seeker. A good candidate knows they’re more than a boilerplate job description. They have a skillset, and they’ll be looking to deploy that skill set to their best advantage.
So, rather than evaluating each salary by basic job role, break each role down into its parts. Analyze the skills needed, the hours to be worked, the responsibilities involved, and anything else that could affect the value of the work.
This kind of pre-implementation analysis gives you a much more realistic view of the value of the role you’re recruiting for than going by job titles alone.
2. Set up Data Sources that Make Sense to Your Company
To benchmark your salaries; you need data to draw on. Make sure your data sources are relevant to your company.
For example, if you’re trying to determine benchmarks for a receptionist's salary, remember a receptionist for a doctor’s office will need a different skill set and have different responsibilities than a hotel receptionist. So, it’s important that doctors seek out benchmark data from the medical field and hoteliers seek out data from hospitality.
You’ll also need to factor in geographical location. If you’re a US company looking to hire in the UK, you need to look for UK sources rather than going off US data.
If you’re not sure whether a data source is relevant, do a little research into the role. If the skill requirements, hours, responsibilities, and so on tally, this may be a source worth pursuing. If not, look for something more comparable.
3. Set Targets and Goals that Match your Strategy
Salary benchmarking should be done strategically. Think about why you’re making your salary more competitive. What do you hope to achieve by doing so?
Your benchmarking efforts should align with your overall brand strategy, and your goals and targets should reflect this. For example, if you want to improve the quality of your product, an aligned target could be something like 'Attract three top researchers/developers with competitive salaries and benefits.’
4. Determine a Salary Range and Additional Benefits
The next step is determining a salary range and additional benefits. At this stage, you need to do some budgeting. If you have accounting software with payroll, you can run benchmark figures vs. your payroll budget and develop a salary range that’s both competitive and fits within your accounting schema.
To go that extra mile and make your company even more attractive to top talent, consider adding additional benefits. Popular options include health and dental insurance, and company vehicles, etc.
5. Review and Adjust Salaries Regularly
Benchmarks change frequently. Ideally, you should anticipate these changes and adjust your salaries beforehand. If this isn’t possible, try to keep your finger on the pulse and alter your salaries as the markets evolve.
A good time to review your salaries is at the end of the financial year. By comparing your current salaries against other salaries in your industry you’ll be able to identify competitive salary ranges for positions you’re hiring for.
If you’re in the UK you can follow this handy payroll year end checklist so you don’t miss any deadlines when filing with HMRC. If you’re in the US, you can read more about end of year payroll reporting here.
Benefits of Salary Benchmarking
1. Attract Quality Employees with Competitive Salaries
You get what you pay for—this is as true for employees as anything else. A salary that reflects a skilled applicant’s real-world value will not only attract attention from the top talent but also put will not only attract attention from the top talent no attract top talent's attention and only attract attention from top talent but put you in a good position to negotiate employment terms.
By understanding what work is truly worth to your company, you’re guaranteed to bring in and retain the best in the business.
2. Retain Top Talent with Fair Salary Packages
In 2023; employee retention isn’t easy. People have a lot of job mobility and are both willing and able to leave roles quickly and easily if something more enticing comes along.
By offering a competitive salary package that rises in accordance with industry benchmarks, you raise the likelihood of your employees sticking around.
Salary is almost always a dealbreaker when someone is considering switching jobs. It doesn’t matter how many pizza parties you throw or how many times you make someone ‘employee of the month’; if you’re not offering a competitive salary, they’ll walk as soon as they get a better offer.
To retain your best talent, focus on their salaries first and foremost.
3. Maintains Good Employer Branding
Your reputation as an employer is crucial to attracting and retaining top talent. Branding yourself as a good employer usually requires a multifaceted strategy involving a positive work culture, great employee benefits, and more.
But one of the most important aspects of good employer branding is competitive pay. By setting up and maintaining a salary benchmarking policy, you can quickly establish a positive reputation in this area.
4. Fosters a Positive work environment
Paying a competitive salary lets your employees know they’re valued. This, in turn, boosts staff morale and helps improve the culture of your workplace.
Employees who feel valued and respected are likelier to be happy and fulfilled in their roles. And happy, fulfilled employees bring that energy to the workplace, creating a positive work environment.
Salary benchmarking is key to attracting and retaining employees in 2023. With a good, competitive benchmarking strategy, you can both bring in and retain the best of the best.
Keep your benchmarks up to date so your company maintains its reputation as a great employer and prevents your employees from ever being tempted to jump ship.