How can Salary Benchmarking benefit your business?

According to an article recently published in People Management magazine, employers can boost efficiency whilst retaining key staff, by paying competitive wages and staying close to the market that they operate in.

The rise of salary comparison search engines like ‘pay scale’ and ‘benchmark my pay’ have made it easily accessible to measure wages against peers, whether in the same or a competitor organisation. However, is this really an accurate way for an employee to assess their worth within an organisation or is it merely setting unobtainable and unrealistic salary expectations?

Employers and employees alike should recognise pay not only as an immediate compensation, but also as a development tool. Investment in an individual shows commitment and appreciation which, in terms of self worth within a company, far exceeds any monetary value.

Salary management guidelines can be put in place as a means of not overcommitting on pay too early but still maintaining a level of incentive. One way of successfully implementing this is by providing a clear career plan from the outset i.e. providing a starting salary, which is expected to grow and progress the employee further in their career over the medium and longer term.

Benchmarking should be a flexible and transparent process. Before the economic crisis of 2008 people who were ‘marketable’ could demand pretty much whatever they wanted which, in turn, caused a real issue with fairness and equity. As a result, companies are now finding it much harder to accurately benchmark salaries against those paid out prior to the crisis. In this instance, rather than raise the base salary, employers are focusing on long-term incentive plans, pension and healthcare contributions and other attractive packages to offer.

It is rare that the reward package for one job is the same as another. Statistics show that 23% of employees take a job for career development, 16% for the most appealing work-life balance and 15% for job security. Other factors include location, challenge of role and work environment. These should all be taken into consideration when assessing someone’s remuneration. Therefore, benchmarking should always be considered alongside non-financial incentives and never in isolation. When it comes to staff retention, statistics show that if pay is the only issue addressed then an employee will quickly become used to their new salary but equally quickly become unhappy with the non-financial aspects. Hence, why “throw money at the problem counter-offers”, so often backfire after less than one year.

People Management magazine therefore offers 10 tips for successful benchmarking:

  1. Establish your goals. Is there a particular area that is struggling to recruit/retain staff?
  2. Set your budget. Consider the data objectively.
  3. Complete job descriptions. These should define around three-quarters of a role’s criteria.
  4. Review the hybrid roles. Avoid merging roles into one.
  5. Check the details and cross-reference all data received.
  6. Limit your expectations.
  7. Start with the salary. Benchmark the basic pay then build other rewards into the package.
  8. Look forward. Offer compelling offers for staff today, but allow for progression.
  9. Resist the urge to inflate.
  10. Keep it fresh. Consider high turnover and market changes when updating your data.

Using these as guidelines, employers can create an effective salary benchmark and remain competitive. Employers that are knowingly underpaying staff should quickly re-evaluate their strategy, as retaining staff in the current market is not getting any easier; especially when savvy employers are offering more attractive, holistic remunerations. Those companies that do not take the time to really think through their reward schemes will pay the price. An employee who senses a lack of care will quickly move on; by which time any kind of ‘counter-offer’ will be too late.

The moral of the story is, don’t wait for an employee to resign, to show that you care.

Please do not hesitate to contact Summit Search and Selection Ltd if you require assistance with any of the benchmarking issues referred to above, specifically within the commercial real estate market.