6 steps to maximise value of pay benchmarking
Getting the facts around your market pay stance is essential. Pay benchmarking allows you to create effective reward strategies, design robust pay structures and be consistent and confident with your decisions and messages around pay. Here are six steps to make sure you get the best return from your pay benchmarking project:
1. Understand why you're doing it
Make the aims of your pay benchmarking project clear from the outset, for example:
- ‘We aim to be a median payer.’
- ‘We accept we’re not market leaders in base pay, but we want our benefit package to be first class.’
- ‘We want to track the market so we can reward for performance.’
2. Agree the budget
Getting a budget for a pay benchmarking exercise isn’t always easy, which is why you need to get your sums right. Help management understand the value of benchmarking salaries by highlighting the benefits in financial terms:
- The value of your leaky bucket, or the money you are spending outside a normal pay review – could this be managed more efficiently through pay benchmarking?
- How much you’re spending on costly recruitment campaigns with poor ROI – is the business wasting resource by pitching jobs at the wrong market rate?
- What your attrition rates look like, whether you can be confident that people are leaving for reasons other than pay, and the cost of training new recruits – would a more informed picture of the pay landscape help?
3. Know your data sources
Remember a small amount of investment in a good salary survey reaps reward over the long term. A solid and credible data foundation will help ensure success in communicating pay decisions. Free salary information is readily available online, and may be the only option that budgets allow for some, but the data is often very high level and masks hidden salary elements. Instead, choose surveys that provide data for roles with a reliable and robust matching methodology and if you can, track down the survey that is best renowned for capturing data in your sector and has well-known participant companies. This gives real authenticity to your benchmarking and helps instil confidence in the process.
4. Use data insight tools
So often the real value of pay benchmarking is lost as businesses use it as a point in time exercise. The real value comes from using a data insight tool such as PayLab™. It provides valuable, dynamic and up to date reporting, which provides credibility and value in ongoing conversations around pay and recruitment with managers and employees. It also helps you maximise the efficiency of your pay spend, by reducing cost wastage and improving pay control and governance, giving you better control of pay budgets and reducing variation in how managers make pay decisions across the business.
5. Be open with your employees
Employees often have distorted perceptions or unrealistic expectations about what pay benchmarking might mean for them. It’s important to be transparent and honest about the aims of the pay benchmarking project, helping employees understand the benefits of benchmarking and feel engaged in the purpose and the process. Sharing the process and sources outside can really help build credibility.
6. Consider independent advice
Use an experienced, external partner to support your pay benchmarking project. Innecto is independent of the big pay data publishers so we can provide an objective view of what is right for your business or look to blend a number of sources. Our expertise means we can match your roles, working with you to ensure the most accurate survey matches for your organisation's jobs. We provide expert analysis and reports highlighting your company's position against the market, helping you make sense of complicated pay data.
For more advice about pay benchmarking, please get in touch: 020 3457 0894