Salary Benchmarking: Tools to Craft Your Process
In order to determine the market rate for each position, internal job descriptions are compared to those of competitors in a process known as salary benchmarking, also known as pay benchmarking. Typically, salary benchmarking surveys or other sources of market pay data are used to collect external data for the study.
The process of salary benchmarking compiles data on compensation and benefits for various organizations. The wage package that is being given is then compared to those that are being offered for the same function by rival companies. The average compensation for particular roles within an organization is then determined using this information.
Thus, how does this process come around to 100% beneficial capacity? Of course, by using the right approach and practices.
HR departments must take into account factors like company size, industry, training, location, and required education when benchmarking salaries. This analysis is incredibly significant when generating roles because a business needs to set a competitive pay range to draw in suitable talent.
Teams track their competitiveness through metrics including the pay range midpoint, which is the average that an experienced staff member would expect in salary.
In addition to those practices mentioned above, many have innovated and crafted strategies that can contribute to making the process easier but with the same results, such as compensation benchmarking audits and job matching methodologies, which fall under two categories: quantitative and non-quantitative. These methods are then listed as:
- Ranking method
- Grading method
- Point-factor method
- Factor comparison method
Salary is only one element of compensation, albeit an important one. Overall compensation may include, for example, employer contributions to retirement or other saving plans, paid insurance, paid time off, or stock options. So look at a salary benchmark as one key element in the overall compensation picture for a given job.
Follow this blog for part 2 where we discuss the most common FAQs in salary benchmarking.
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