Remuneration benchmarking – is it relevant?
My boss came to me recently after attending a conference and said, “we need to complete some remuneration benchmarking, to ensure we are paying the market rate for our employees”. I’d heard of remuneration benchmarking, but honestly, I wasn’t a huge supporter of it.
Firstly, I often questioned the accuracy of the data, how could we ensure the report that we were purchasing was truthful? There is no way to check or confirm the data that is provided by individual organisations, essentially, it is reliant upon trusting the honesty of the reporting organisation.
Second, could we ever really truly compare two roles? There are so many factors that determine the salary for a role, sure I could probably get the best match, but were we really going to use this to determine the exact rate we should be paying to inform our entire pay structure?
Lastly and this is the biggest one, in my experience, even when organisations identified an employee was well under the market rate, many were reluctant (or not in the financial position) to increase that employees’ salary to the so called ‘market rate’.
However, like everything in business I recently went through the process and it would be fair to say, my perspective has shifted. I thought I would share my learnings with you, so you can make an informed decision about the role of remuneration benchmarking for your organisation.
- The value of the remuneration benchmarking process is reliant upon the data you are using. Make sure you are using a remuneration benchmarking report from a reputable provider with a significant survey group (at a minimum over 2000 organisations). The report should break down remuneration in different industries and geographical locations and each role should contain a clear job description defining the role and skills/experience.
- It is probable you will identify one pattern, employees who have been with you for some time and have grown ‘internally’ within the organisation are likely to be well below market rate. This was eye opening for us. Although these individuals would often get salary increases in their new roles, these increases often trailed well below market rates.
- A remuneration benchmarking survey should be used as a tool, not ‘the’ tool. A number of other factors need to be considered including organisational profitability, individual employee performance, other benefits offered and employee satisfaction/engagement.
- Engage with your team – don’t just rely on a survey to tell you if an employee is happy with their salary. Ensure your leadership team are regularly having conversations with employees about their role satisfaction, including their salary. Satisfaction isn’t always driven by money and a simple change in working hours could be more beneficial to one employee than a salary increase.
- Use remuneration surveys when you are determining the salary for a new role – but use them in conjunction with a review of current adverts for the same role (ideally direct adverts from employers and not recruitment agencies). Make sure you consider the cost benefit analysis. Does what we will pay for this role justify the value we will receive?
- Look at the big picture after you have completed your remuneration benchmarking report for your organisation – where does your organisation sit in terms of remuneration overall in the market? If you can’t compete on remuneration, what else can you do to make your workplace a great place to work?
Needless to say, I do see the value of remuneration benchmarking and will continue it based on my recent experience. Do you need help with remuneration benchmarking at your organisation? We’d love to help – get in touch.
Find out how you can gain access to the salary data through our HR Outsourcing service by calling 1300 887 458.