Generally, benchmarking has always been a great organisational practice that most businesses use to set baselines, understand best practices, identify improvement areas, and grab opportunities.
Benchmarking can allow organisations to:
- Get clear perspectives about how well they’re performing compared to other organisations.
- Analyse performance gaps to come up with strategies to improve.
- Create standardised processes and procedures.
- Maintain a culture of continuous assessment and improvement.
- Set realistic and ambitious performance targets.
- Manage change.
- Monitor business performance.
If you want your business to have some competitive edge in human resources, you may have to consider salary benchmarking as one of the tactics to use. If you wonder whether it works, this article will give some advantages to nudge you in the right direction. But first, you’ll need to understand what salary benchmarking is.
What Is Salary Benchmarking?
Benchmarking is whereby a company compares its business components or structures against the industry leaders in its sector. One of these structures includes human resource issues such as salaries.
Salary benchmarking, therefore, involves collecting information relating to pay and benefits from various organisations and competitors. The information gathered is then used to develop ideal salary levels for different roles. The business can also use such information to create competitive employee packages. In other words, when a company benchmarks salary, they create a competitive environment within their organisation.
Importance Of Salary Benchmarking
It’s no secret that employees are one of the most important assets in any business. Keeping your employees happy and reasonably taken care of has many positive ripple effects on the success of your business. And one sure way of keeping them happy is through fair remuneration. Therefore, it’s important to have a clear understanding of the current salary trends in your industry.
Now that you know what benchmarking is all about, here are some advantages to take note of.
You Stay Within Range
The salary benchmarking process also helps keep track of the salary trends in the industry. When you benchmark, you’ve never left too far behind or ahead of the others. You get to compare similar salary rates to determine the pay package that best suits your employees. Your HR department doesn’t have to make costly salary structures.
Helps with Hiring the Right Staff
Benchmarking is an essential tool for the human resources department regarding staffing and recruiting. The information you receive from benchmarking can help you assess your market competitiveness, especially in volatile times like during lockdowns and depressions. It will also help you with hiring the right people for your budget, even when there are significant shifts in pay rates.
Improves Staff Retention
Having a high staff turnover is never good for any business. You lose time and resources, including unnecessary retraining and severance packages. Among other things, having competitive salaries and packages can avoid this. When you’re within remuneration range or above others in your field, you will have a higher chance of staff retention.
Helps with Competitive Remuneration Packages
Having sufficient knowledge about the current market trends can be beneficial. It allows you to take advantage of the salary scales of your competitors, which can help you retain your best talent. You set the best packages to keep your business competitive when you know the market trends.
Attracts the Best Talent
As a result of having some competitive salaries and benefits, your business can attract the best talent in your industry. When you benchmark your salary, you can implement the best compensation strategies to make your business every employee’s dream.
Helps with HR Planning and Budgeting
Salary benchmarking can help you with salary calculation and budgeting. Your human resources department will have a clear idea about budget allocations when hiring new staff.
Provides Good Market Data for Leaders
The HR department sometimes adopts processes and policies that don’t always add much value to the business. With some salary benchmarking, your business could gather enough data to provide some market insight and guidance. With this insight, your leaders can make more informed decisions and be sure that employees are being treated fairly during pay decision-making.
A business has to constantly analyse and implement better strategies to beat its competitors. To do so, it has to benchmark itself against others. It also has to provide the best products or services, and implement the best HR practices, to excel in its industry.
If your business wants to make the best HR and remuneration decisions, salary benchmarking can be useful. Benchmarking helps you attain current salary information in your field. Salary benchmarking can also help your business evaluate and prioritise areas of staff improvement.