Once you are presented with existing salaries, it allows you to study these practices and in turn identify what is working and what is not in pay structures. Moreover, it is usually done through salary surveys with considerations on the following factors: These factors serve as the basis in finalizing final salary packages to be offered for a specific job position. That holds doubly true if it applies to promotions, too. It adds a layer of protection against accusations of wage fixing. Will you take into consideration their location or will you only concentrate on skills, experience, and qualifications? Rather, you should be aware of the differences, and be transparent. Just by knowing the market rate for roles within your company, youll have insight into exactly how much labor will cost. To help you provide better job offers, you may also consider offering other benefits like a work-from-home setup, food allowance, or travel perks. Salary benchmarking is also known as compensation benchmarking. However, HR professionals genuinely understand the importance of retaining good staff, in fact, a third of HR professionals view employee retention as one of their top priorities. A competitive salary means that the wage you are offering matches or exceeds the market average for the same role. Salary Benchmarking is a way to determine that your employees are paid fairly and equitably for the work they perform. Salary benchmarking is an important process within businesses as it ensures employees are being paid appropriately and creates a competitive job market, but what are the benefits of salary benchmarking? The BPO industry has historically been resilient during crises, said Derek Gallimore, founder of Outsource Accelerator, an industry adviser. Market rate salary refers to the average salary that other employers are paying their workers in comparable or similar positions. Salary benchmarking will help you avoid this because what you will be offering is according to statistics. Frequently asking them for feedback and taking meaningful steps to implement it into your processes. With 15,000+ articles, and 2,500+ firms, the platform covers all major outsourcing destinations, including the Philippines, India, Colombia, and others. If you are unsure where to begin with your selection, the criteria below are great places to start: You should also consider comparator organizations which share a similar Employee Value Proposition (EVP). But how large is it? Purposeenables us to examine each role within the organization and determine its primary objectives and how it supports the overall mission of the organization. What are the benefits of salary benchmarking? How will you compensate employees with different seniority levels? Experts are adding insights into this AI-powered collaborative article, and you could too. Learn the key factors to consider when benchmarking compensation and benefits in your industry. All things considered, happier employees are more productive, which benefits you in the long term. Most benchmarking tends to focus on big ticket items and neglects some of the smaller benefits that may have a significant impact on employee satisfaction such as recognition programs, on-site services, flexible schedules, and other popular perks included in employee benefits packages. All Rights Reserved |Privacy Policy. Chat with an outsourcing expert today! When expanded it provides a list of search options that will switch the search inputs to match the current selection. The cost of labor is, likely your largest expense. Outlined below are some benefits of having salary benchmarks: Enables fair competition in the job market: Salary benchmarking provides HR professionals with data highlighting what. What are the most important skills they need to have? Recruiters focus on the cash compensation because they are paid a percentage of it, so if your employees are only comparing salaries, this leaves you and them at a disadvantage. Salary benchmarking is also essential to employees as they can know whether they are paid appropriately according to their market rate. Will new hires be on your payroll or will you work with them as contractors? If youre using bonuses and raises carelessly, you might achieve the opposite effect of what youre expecting, and actually demotivate your employees, if you fail to always give them the amount they expect. Come chat with our outsourcing expert now. Communicate your compensation plans to your employees, Educate them about the different benefits theyre getting. You might find that the salary you are offering is above or below that of your competitors. For example, a combination of salary surveys and labor databases could hypothetically tell you that the average salary of a marketing executive is US$70,000 per year. If workers feel as though their pay grade and other job perks could not be matched elsewhere, they are more likely to stay with your company. Figures is quickly expanding throughout the European market. The foundation to any market survey is its job matching approach. Employee experience, or how your employees feel about their work and your organization, is one of the most important contributing factors to the success of a business. (Plus, youll prevent the imminent breakroom fight between cubicle mates over a dollar disparity). By the time you enter a store and swipe your credit card, you already know that the receipt youll leave with will reflect a fair market price for the product. You are more limited by the process of benchmarking as you are simply adapting numbers from elsewhere. The worst case is a high employee turnover rate. View our areas of expertise and find out who weve worked with, Hear from real clients and delve into some pay & reward projects, Read how we help our clients with their specific needs, Study our latest guides on a range of pay and reward topics, Read all of our latest articles and discussion pieces, Sign up for one of our regular interactive reward workshops for practical tips and guidance for your organisation, Register your products or services on our 3R Academy, Our trusted partners and affiliates who share our core values, See our latest vacancies and how you can join the team. ), Choose reliable and relevant data sources. A benefit of compensation benchmarking is that it forces you to distinguish salary tiers for lower, middle, and top-performing employees. Despite this, money is not the sole incentive, and you can make your business seem more appealing than its competitors through other means. Download the outsourcing toolkit plus all the key resources you need, Submit a guest post article to 'The Source', Promote your BPO, grow traffic & generate inbound leads, Subscribe to the leading outsourcing newsletter, Submit a press release statement from your company, Get in touch with Outsource Accelerator and Derek Gallimore, Invite Derek Gallimore as a keynote and conference speaker, See all partner services and media options, The complete outsourcing toolkit plus all the key resources you need, Home Articles Importance of salary benchmarking in hiring employees. For example, you may need to account for differences in job titles, descriptions, responsibilities, skills, qualifications, performance, seniority, or geographic location. Do you want to benchmark base salary, total cash compensation, or total rewards? hbspt.cta._relativeUrls=true;hbspt.cta.load(4526592, '6cd12c6a-1315-4b98-aa5b-71e14eb4bc0f', {"useNewLoader":"true","region":"na1"}); Watch the recorded webinar to get handbook help from our HR expert. Salary benchmarking is important because it allows companies to remain competitive and retain talent. Its a hard pill to swallow when you learn about someone with the same job title earning more money. It helps organizations assess the competitiveness of their total compensation versus the market, and is an important step in managing your human resources program. What are the best practices for disclosing executive pay ratios? Companies may not have always have the right people and resources to conduct salary benchmarking. Its important to understand the methodology for job matching used by the survey provider and how the process is managed. Build a high-performing and resilient organisation, One World Trade Center, 285 Fulton St., New York,NY 10007, United States, Build a high-performing and resilient organization, Learn why forward-thinking companies use Leapsome, From onboarding to adoption we support your success, Build a high-performing and resilient organization with Leapsome. Salary benchmarking helps you: Contribute to a fair work environment Gathering employee compensation data and comparing it to your internal salary and benefits structures lets you ensure your salaries fall within (or even exceed!) But how do you benchmark effectively and accurately? Although benchmarking is a . Grade data is a more stable representation of actual market movement versus incumbent salaries, which is highly variable. And, with 80% of all job searches done online, its never been easier for applicants to quickly find good job opportunities. Compensation benchmarking can also help keep your employees happy and satisfied in their jobs. People ops and HR professionals use this compensation strategy to retain talent and determine whether they offer competitive compensation including benefits. Outsource the right way. Outsource Accelerator is the leading Business Process Outsourcing (BPO) marketplace globally. Remember: Equitable compensation benchmarking fosters an environment where diversity can thrive, creates a psychologically safe and inclusive workplace, and solidifies your commitment to diversity, equity, and inclusion (DEI) initiatives. Most tools are not able to measure pay gaps in total compensation because they simply dont have all the data. Remember the salary benchmarking factors to consider when determining fair pay? Pay decisions should be made based on a combination of market insight and sound judgement. We are the trusted, independent resource for businesses of all sizes to explore, initiate, and embed outsourcing into their operations. If employees total compensation is meaningfully higher than the cash compensation for example, if their share options are appreciating over time or if they have private insurance and pension you need to be aware of the risk that they actually forget about it when discussing job offers with recruiters. After you have analyzed and adjusted the data, you need to compare it with your current compensation and benefits practices and policies. A startup might be able to offer a less competitive salary than a well-established organization but provide more interesting work opportunities in the future, as well as equity and a solid benefits package. How do you align executive compensation with performance, strategy, and culture? How can you provide a competitive salary package that will attract the best candidates? Whats the career path of the person youd like to work with? This is extremely important for two main reasons: If the information is scattered across many systems (pay in payroll, options in Seedlegals, pension in a separate system, and so on), employees often wont be aware of their total compensation and wont appreciate its full value. This category only includes cookies that ensures basic functionalities and security features of the website. A competitive salary and other job perks are ways that make employees feel as though their work is valued. Why employee retention should be your top priority, Prioritising Retention for Small Businesses. Speak to an expert Of course, both top talent and competitive pay will be up to you to define. Why Should Companies Benchmark their Salaries? An insider's view on why remote and offshore staffing is radically changing the future of work. We created this article with the help of AI. Organisations that have a talent retention strategy will ultimately have a competitive advantage in the long run. And, as your business grows, this becomes exceedingly important. You might opt to work with a compensation and benefits professional on a project basis, to define your compensation policy and get help with salary benchmarking, or you might also set up a long-term partnership with them. Otherwise, that convenient click could quickly turn into employee turnover. This website uses cookies to improve your experience. Knowing what your competitors are offering for similar positions will help you define your compensation strategy, position yourself in the market, and find ways to stand out.In this article, well talk about salary benchmarking: What it is, why its important, what its benefits are, and also how to do it right. They are also more likely to stay if competitors wouldnt be able to match the compensation they are earning from your company. Do you want to focus on specific roles, levels, locations, or functions? And remember you need to show your employees that you value them not only through monetary rewards. Nevertheless, the market is still adjusting to the increasing prevalence of distributed work, and there isnt a clear opinion on whats right and whether workers compensation should continue to be adjusted for location. Money is arguably the biggest incentive in the job market, and if you offer a salary that is marginally higher than the average, this will make the role extremely attractive to job seekers. The benefits of salary benchmarking. Once you have narrowed down the selection to your chosen comparators, the next step is to identify which level or percentile of the sample you want to target. Although pay is important dont underestimate the importance of a cooperative and trusting work environment which comes with effective communication. You need to identify any gaps, discrepancies, or opportunities for improvement. You need to track and measure indicators such as employee satisfaction, retention, performance, engagement, or productivity. Crowdsourced data is another important source of information and an emerging method for salary benchmarking. Our compensation and benefits surveys cover a full range of professional and support levels, providing information that ensures a clients pay practices are aligned with the market conditions of leading employers in each country. Performing regular compensation benchmarking ensures that salaries remain fair and are updated with current market trends, which helps retain employees. As mentioned above, there are various crowdsourced salary benchmarking tools such as Figures , Pave, Ravio and Payscale. It is mandatory to procure user consent prior to running these cookies on your website. View Map & Directions. Many employees do not understand what equity is but might be hesitant to admit that to their employer or coworkers. If the role that you are recruiting for is widely sought after, you may improve upon salaries that are already on offer for the specific role. Employers should be able to measure compensation easily, ideally in real time and in one place, and make sure employees are fully aware of it and have all the details easily accessible preferably in the same system. For more information about the process of salary benchmarking, get in touch with Paydata today. Benchmarking compensation and benefits is a crucial step in developing a competitive and fair compensation and benefits strategy for your organization. Use your salary data and analysis to define your salary ranges. Companies that are willing to make the switch and hire most of their workforce remotely now have access to a much wider talent pool, as theyre no longer limited to a specific geographic area. If thats your case, there are a number of important questions you must address: The answers to these questions will guide your pay benchmarking efforts and youll be able to decide what data you need to look into, and how to obtain it. Organizations typically state their target market position as a percentile of the targeted comparator group. Perhaps the most important motivator, compensation, has become the most complicated especially in our current economy. With the data in hand, youll now be able to analyse the bigger picture and see where you stand. And is there a staggering statistic for the number of employees that left their job because they were paid too fairly? Do you want to compare your compensation and benefits with your direct competitors, your industry peers, or the broader market? Next, you need to define or update your own compensation policy, based on the information you collected and on the analysis you performed. Salary benchmarking sets targets for employers and employees alike. What are some resume screening red flags and deal breakers that you look for? department. And perhaps the salary for marketing executives at your company is US$60,000. It can also help create a sustainable, transparent, and psychologically safe work environment. By reading it, you will understand 5 ways that salary benchmarking can benefit your business. Often, organisations only shift their focus towardsemployee retention when employees start to leaveand turnover figures go up, but by that time it is too late and very little can be done to change their minds. Think about questions like: Are you offering salaries that are higher or lower than the averages for your industry (and location)? 6 main benefits of salary benchmarking Provides equal opportunities for job seekers. Payscale aggregates salary surveys, crowdsourced data, and peer data from HR professionals, to give salary ranges for different positions based on location and seniority. In this article, we will be explaining the importance of salary benchmarking in hiring the right candidates and promoting employees. People teams from leading companies trust Leapsome and rate our platform 4.9/5 on G2. What else would you like to add? Start by determining the average range for the industry, the average income by years of experience, and the average for a specific job title. 5 Ways that Outsourcing HR can Benefit Your Business, Finding the Right HR Outsourcing Partner 6 Factors to Consider, [Webinar] Are You Compliant with 2023 Laws? The first step to compensation benchmarking is identifying all the key attributes of a position. Derek Gallimore has been in business for 20 years, outsourcing for over eight years, and has been living in Manila (the heart of global outsourcing) since 2014. Narrow vs. Broad Career Bands: Understanding the Pros and Cons, 4 Problems With Asking About Salary History. Importance of salary benchmarking in hiring employees, Salary benchmarking is very helpful, particularly in your. Once you define your compensation strategy, you need to be transparent about it with your employees and job applicants. Refine your job descriptions. Salary benchmarkingis a vital component of a talent retention strategy, but often retaining talent is ignored by the c-suite until it becomes an insurmountable business challenge. When a company fails in basic compensation planning, it risks losing talent and dissuades potential hires.
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