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Salary benchmarking helps organisations to: attract and retain talent, create and keep a competitive edge, manage the bottom line, and maintain the organisation’s reputation.
Compensation Benchmarking is the process of using internal job descriptions to match against similar positions in order to determine the external market rate for each benchmark position.
This is accomplished by identifying similar jobs that are offered by competitors and determining what compensation is offered to the incumbents in those jobs.
Performing compensation benchmarking requires acquiring the necessary research data to perform the comparison between the salaries offered by competitors and the salaries offered by the company in question.
The goal of compensation benchmarking is to provide important information to help drive the goals of your organisation and ensure market competitive and fair pay practices.
A salary survey is a standard method of establishing what other organisations are paying for specific jobs or job classes. Large organisations in particular, routinely conduct compensation surveys to determine prevailing pay rates and benefits.
Why is compensation benchmarking important as a “best practice”?
Within the context of an overall HR and organisational plan, salary surveys can provide valuable benchmarking information for comparing salaries and benefits packages so you can make well informed compensation decisions.
A well done benchmarking and analysis can assist you to:
- control costs;
- mitigate legal risks by providing structure to ensure internal equity;
- maintain market competitiveness; and
- enable your organisation to attract, motivate, and retain talent.
How to Match Your Internal Jobs to Your Survey Data
In order to conduct a compensation benchmarking project, the first step is to update your current job descriptions. It is then essential to identify salary surveys which include similar jobs in comparable industries and similarly sized companies. It is crucial that you ensure you are matching your jobs to the right benchmark jobs, to confirm the accuracy of your analysis. In addition to the direct cost of the survey, you will have an indirect cost of actually doing this analysis work.
Consider these three (3) Matching Factors:
- Job Matching
It is very important to use a reputable salary survey to complete compensation benchmarking so that the matches made to the market are as accurate as possible. Compensation consulting
companies employ compensation analytical professionals trained to compile, analyse, and publish data in a confidential and robust manner, ensuring a true representation of pay levels in the market.
- Sector Differences
Pay also varies widely by sector. For example, two (2) CEO roles in companies with a similar turnover can receive vastly different remuneration depending on the type of business and industry.
- Compensation Breakdown Differences
The value of different components of the package can vary greatly. This means that comparing basic pay or even basic pay and bonuses is unlikely to reveal the full picture. This is why it is so important that salary benchmarking considers all aspects of remuneration.
Compare apples to apples
Many companies use salary surveys to set the compensation levels for their organisations. However, it is not always as easy as reading a survey and using the information. It is important to make sure that you are comparing information that is similar. You must have accurate compensation data that reflects real-time market rates and truly matches your organisation and your employees.
Applying Your Compensation Strategy to the Data
Once you select sources for the data you believe will give your organisation the best quality and value, the next step is to apply your organisation’s compensation strategy to the data. Your strategy defines the plan for compensation and links your total rewards strategy to the organisation’s business strategy.
Your compensation strategy will answer important questions for your salary benchmarking projects, such as:
- How do we define our competitive set?
- Where do we want to be relative to our competition, namely lead, meet or lag?
- What are the goals of our compensation programme, e.g. ‘drive performance’ or ‘reward longevity’?
It is not enough to just define the strategy but in order to earn employees’ trust, you must be transparent.
HRC Associates – Compensation Consulting Services
Compensation is a part science and mostly art. Knowing when to eliminate data points, how to age data, and when to adjust and weigh the data is critical. If the final analysis is incorrect, it could result in unintentionally leading or lagging the market thereby having difficulty in attracting key talent. The cost of losing competitiveness is something we cannot begin to put a price on for you.
- Survey Library and Compensation Tools:
HRC Associates has an extensive library of reliable, well established surveys covering a number of industries, geographic locations, and revenue sizes in addition to tools that help accurately analyse the data.
- Custom Surveys:
As third-party specialists, we can provide compensation benchmarking services to ensure that all positions are documented and benchmarked with the external market accurately. We can also customise these surveys to your specific company. Should you need assistance with your job descriptions, we can help with that too.
- Compensation Specialists:
Salary benchmarking compares the total compensation package, including basic salary, cash bonus, share bonus, long term incentive plans (LTIs) and pension, with those of executives in similar organisations. The data can be split by sector, revenue and/or business size to help you get an accurate picture of how your remuneration levels compare. Finally, once you have the market data, we can also give recommendations and guidance on next steps. For example, Employee Analysis – identifying which employees are below or above market and what it would cost to bring them to market, and how to effectively communicate changes to your employees.
Benefits include:
- Make setting salary ranges easy
- Eliminate compensation guesswork
- Make the correct job matches
- Stop overpaying employees
- Reduce the risk of losing your top performers
- Save time and money on compensation benchmarking
Compensation Report for Trinidad & Tobago
Contact us at consulting@hrc-associates.com or 868-285-4HRC to request a copy of our 2015-2016 Compensation Report: Executive, Managerial and Professional Positions.
Our latest Survey analyses national data by base pay, incentive pay, and total cash compensation (base salary, bonus, and direct cash perquisites) for over 3,800 incumbents in 270 Executive, Managerial and Professional positions, across 12 industry sectors in Trinidad and Tobago.
This year’s survey continues to analyse trends in executive reward programmes, including cost control, pay for performance and the incidence of short and long-term incentive compensation.
About HRC Associates
Founded in 1990, HRC Associates is a recruitment and management consulting firm specialising in human resources, compensation, executive recruitment, general management, and organisation strategy and change issues. HRC’s mission is to work with our clients to help them reach their full potential by integrating their people and organisational systems with their corporate vision and strategic intent.
