Is Salary Benchmarking More Critical Than Ever In 2022?

With organisations engaged in a battle for talent and salaries drastically fluctuating, salary benchmarking is essential for any business that wants to stay ahead of its competitors.

With substantially more vacancies than professionals available to fill them, jobseekers now possess a multitude of options, such as hybrid or remote working, 4-day work weeks, mental health support and more meaningful work, making it imperative that businesses do everything they can to access the top talent.

One consideration which has become critical in this competitive landscape is salary benchmarking.

What is salary benchmarking and how do you go about it?

Salary benchmarking is simply the process of comparing your compensation package with those offered at other organisations – in particular, your competitors.

Ideally, salaries and benefits packages should be benchmarked for each role in your organisation, as well as any new positions your company is expecting to recruit for new roles. If this is not a feasible option for your organisation, it is possible to group positions based on seniority and benchmark accordingly – this will also contribute to assessing your organisation’s career development system.

The key to successfully benchmarking is the availability of data. Accessing a data source which encompasses a comparable variety of roles in your organisation in order to evaluate compensation across different sectors and locations. Seeking a greater quantity of roles in a data set will allow you to more accurately assess the minimum, maximum and average salaries of a specific position.

Once you have gathered the relevant data, it should be recorded in a way which enables easy replication, whether annually or quarterly. You should then use this data to make comparisons with what you are paying/expecting to pay and adjust salary and benefits packages if you find your offer isn’t competitive when compared with those being made by other organisations. Whilst candidates are seeking out employers of choice, if your offerings are substantially lower than your competition, you will lose out on the top talent.

Why Benchmark Salaries In 2022?

While salary benchmarking is always critical to support your talent attraction and retention strategies, it’s become even more important as we enter 2022.

Given the lack of available professionals, companies are battling to attract and retain talent which in many cases is hiking the value of salary and benefits packages. This not only impacts organisations looking to hire but will encourage employees already in roles to look elsewhere if they feel their existing salary is no longer competitive.

Which such a big shift in the jobs landscape, companies which have not recently benchmarked their compensation packages will be utilising out of date figures, resulting in their compensation packages becoming uncompetitive.

As well as remaining competitive, benchmarking also enables businesses to maintain sensible pay structures by characterising the maximum remuneration scales. As a result of the shortage of professional talent, which has created increased competition, there are some organisations offering unsustainable increases which will be problematic in the long term. Bidding wars resulted in resignations being met with extensive counteroffers, which in individual cases are adequate, however, when other employees find out a colleague received a generous pay increase by looking for another job, this will lead to similar action.

Employee satisfaction is often a complex topic to analyse. Although there is no formula to ensure your employees are happy, it can be universally agreed upon that salary plays an important role. On top of a healthy workplace environment and tangible personal goals, all employees want to feel valued within your organisation and the primary method to quantify that value is through pay. If an employee believes they are underpaid for their position, they are more likely to become dissatisfied and look for a role elsewhere. Salary benchmarking gives employers the ability to analyse the pay structure of industry competitors, updating their own approach to ensure employees are being paid fairly and are more satisfied in their positions, therefore reducing staff turnover. This is one of the biggest benefits of salary benchmarking.

Understanding the changing salary landscape will help organisations navigate the current environment and will help you to know where and how to allocate a budget for your selection of roles.

Why Benchmark Company Benefits In 2022?

When benchmarking salaries, you will likely find that your organisation simply cannot meet all of the salary increases being offered by competitors. Therefore, it is also useful to benchmark the wider benefits packages other companies make available to their employees. In the relentless quest to claim the best talent, employee benefits benchmarking is crucial.

While obtaining data on benefits can be more difficult than salaries, having some basis for comparison can help you to build attractive overall compensation packages, rather than solely relying on offering the very highest salary to attract talent.

Jobseekers are increasingly motivated by the overall package, rather than just salary. The top benefit trends for 2022 are Top benefit trends for 2022 circulate around remote working, increased flexibility, and focus on mental health and wellbeing, therefore are there alternative or non-financial benefits which could be introduced which would appeal to candidates more? With employees seeking a better work-life balance, these options could then be deemed more attractive than a competitor offering a higher salary but none of these benefits.

With the job landscape fluctuating all the time, benchmarking total compensation packages, including benefits, will help you to offer overall packages which stand out from your competitors. ‘The Great Resignation’ although not entirely detectible within the UK, has certainly been evident with professionals having the intent to move but not following through as of yet. If this flirtation translates into widespread resignations, you need to have salary and benefits packages in place to attract those who are on the move.

Benchmarking can help you measure your return on investment. Does what you are spending on employee benefits really pay dividends when it comes to employee retention and overall morale? Or do you need to invest in other areas in order to maximize your ROI? You may want to consider deploying internal surveys in order to gauge what is most valued by your workforce if you don’t already have a measurement tool in place.

What Salary And Benefits Benchmarking Tools Should You Use?

Listed businesses have remuneration committees in place for exactly this purpose but, without any guidance of the compensation packages offered by other organisations, it can be difficult to know where to start. 

Salary surveys can be useful for benchmarking at more junior levels, particularly with the significant volume of data that can be generated when comparing pay for roles that are relatively common in the marketplace. 

However, at the most senior level – where there are simply fewer roles to compare, and typically a larger variation in the make-up of compensation and benefits packages, it may be more difficult to determine a competitive benchmark. 

There are a number of free salary surveys and benchmarking resources available here.

While it’s important to recognise and understand the current challenges in recruitment, it is impossible to know if this surge in salaries is temporary or here to stay. Even if it is temporary, this is likely to create equal pay risks due to pay discrepancies between new and long-serving employees, therefore having a strategy in place now may prevent employing strain in the not-too-distant future.

Talent management and employee retention inside a business can benefit hugely from salary benchmarking.  A company that ignores the significance of benchmarking and the advice that stems from benchmarking does so at its peril.  However, make good use of benchmarking and a company should see retention rates improve, as well as employee satisfaction levels.  

If you need any advice on how to approach your organisations’ benchmarking, get in touch with Corvus today at hello@corvus.jobs

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20/01/2022

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