Salary benchmarking: a guide to pay and rewards

According to a recent survey, over two-thirds of workers are feeling confident about moving into a new role within the next few months. With the average cost of employee turnover sitting at over £30,000, how can your organisation combat against this?

 

How can you ensure that your employees aren't just happy, but are wanting to stay and grow with your organisation?

Contents

The Great Resignation

According to a recent survey by Randstad UK, 69% of workers said they were feeling confident about moving into a new role within the next few months, with 24% planning to move to a new company within 3-6 months.

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Research by Oxford Economics and Unum shows that the average cost of employee turnover is £30,614, and this number can increase substantially if you’re having to hire and train for a specialist role in your organisation.

This means if you were to lose 4 employees in a year, it would ultimately cost the business over £120,000 to replace lost staff.

But how do you combat this? How can you ensure that your employees aren’t just happy, but are wanting to stay and grow with your organisation?

There are a few different answers, including ensuring you have a great wellness programme in place, but ultimately in order to lower attrition rates, you have to be the best at what you do.

Being the best at what you do is more than offering the latest and greatest products – the key is to be the best employer. Be number one for diversity, number one for compensation, and number one for rewards and benefits.

But how is this accomplished? How do you know where you rank if you don’t know what your competitors are up to? With salaries being well-kept secrets on job advertisements, and competitors being tight-lipped about their offerings, it can be hard to understand where you’re going right or going wrong as a business.

Why should you benchmark?

“You may want to ensure you’re remaining a top employer, an employer of choice, or you may want competitor analysis to know what your competitors are doing.”

Keisha Johnson, Recruitment Manager at Weil, Gotshal & Manges LLP

What is benchmarking?

Benchmarking is a fantastic and illuminating solution that can provide real-time data and insights about your industry and sector.

Different examples of benchmarking can include:

  • Salary benchmarking
  • Rewards and benefits benchmarking
  • Diversity benchmarking

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Salary benchmarking

Salary benchmarking uses data from primary and secondary sources in order to accurately benchmark salaries of specific roles within an industry.

This data is obtained through job advertisements, third party labour market data platforms and most importantly, conversations with relevant post holders in competitor organisations.

Salary benchmarking can be used at all levels of an organisation, from junior staff all the way up to C-suite leaders.

Whether providing spot salaries or helping to define or update salary bands and pay grades, our salary benchmarking solution provides tailored results that ensure your company is staying competitive within the industry.

Rewards and benefits benchmarking

Rewards and benefits benchmarking often goes together with salary benchmarking.

Where salary benchmarking looks at base compensation, rewards and benefits benchmarking determines the total package, which can often be a better indicator of where your business may be ahead of the game or falling behind in your industry.

This type of benchmarking is usually bigger picture.

  • Bonus structure
  • Pension
  • Annual leave
  • Parental leave
  • Private insurance
  • Life insurance
  • Car allowances

The above fall under this wider umbrella.

In some instances, you may find that while the base salary offered is higher than your competitors, the overall package may be lacking the added-value that these rewards can offer.

This data again is derived from real-time conversations with post holders in the industry, as well as other primary data sources such as annual reports and job adverts.

Diversity benchmarking

Diversity benchmarking is an emerging solution that is gaining popularity globally.

Whether it is related to gender, sexuality, or cultural background, it is a great tool to help inform strategic decision-making at the executive level.

It has the power to influence workforce planning, recruitment practices, and overall corporate strategy.

By understanding where diversity may be lacking, plans and tools can be tailored to your needs and allow your company to develop plans aimed directly at tackling these issues.

This insight is gathered in a similar way to salary benchmarking.

We speak with appropriate candidates in comparative organisations, we map the talent pool and perform data analysis, and we determine through additional secondary data sources where industries may be falling behind in terms of affirmative action and diversity planning.

And these examples are just the tip of the iceberg.

Keisha Johnson, Recruitment Manager at Weil, Gotshal & Manges LLP says “When we think of benchmarking, the first thing that comes to mind is salary benchmarking. But it’s vast, it’s far and wide – you can benchmark anything: diversity, male/female ratio, there are so many things you can do around benchmarking, and it can absolutely be an advantage.”

“When we do analysis, we’re looking at the top 25 to 50 roles that drive disproportionate value. We break down the value agenda and ask, “How are we going to make money in the future?” Some parts will be new. Others will be sustaining.”

Bryan Hancock, McKinsey leader and talent expert

How benchmarking affects your business

Benchmarking enables you and your company to make impactful decisions regarding compensation and reward.

If the benchmarking reveals your company is not offering competitive salaries and benefits, this can then lead to both recruitment and retention difficulties, especially in niche industries where talent can be hard to find.

The recent “Anti-work Movement” further underscores the importance of offering attractive compensation.

This online movement, where employees are standing up and leaving minimum wage jobs and creating a shortage of essential workers in many retail and hospitality sectors, is gaining momentum, particularly across America, where minimum wage
has remained stagnant and unchanged since 2009.

This movement is anticipated to continue to grow and develop and affect more than just minimum wage jobs as employees are beginning to share salaries and experiences through online websites, including Reddit,
Fishbowl and Glassdoor.

On the importance of benchmarking, Keisha Johnson states “you know what you pay your employees, but if you’re getting pushback, saying that salaries are behind the market, that’s only anecdotal. Salary benchmarking can confirm and allow you to make a business case to allow salaries to be raised or addressed. If you believe something may not be correct, you need evidence to support that.”

Benchmarking can provide insights into the industry or provide confirmation of where your business is within your industry.

You may have a feeling about what your competitors are paying, but by using a benchmarking service like the one available with Talent Insight Group, you get accurate and real-time data, evidenced through primary research and conversation with post holders, or through secondary data analysis gathered from online analytics tools and job adverts.

Our own Insight Manager, Rob Dolan, said “[benchmarking] is beneficial and allows companies to position themselves competitively within their area. If they’re having difficulty in hiring, benchmarking can provide an edge and help determine why they aren’t able to hire.”

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How benchmarking helps

As part of significant plans to grow the business across the African continent, our client needed to understand the market, pay and reward data and the competitors operating in that space. We were asked to carry out research and share insights that would help to set the strategy for this essential area of development.

We uncovered the insights they needed, quickly but accurately to minimise risk.

Read the full case study

Turning data into tangible goals

Through benchmarked information, companies are enabling their own future success and growth.

With evidenced and insightful information, businesses are in control of their external opinions and narrative within their industry.

Benchmarking can also assist with internal engagement and employee productivity. But how can we use this data and turn it into real results?

Keisha Johnson provides some insight: “For us, when we’ve looked at diversity benchmarking for example, it’s cut and sliced to say ‘yes, you may be behind or ahead of the market’ and you can introduce measures as a business on how to tackle that issue. You can say at X time where were here, and by X date we want to be there.”

You can benchmark at a later date and see the progression that has happened, or where more resource may be required.

She added “if you see there aren’t many women, is that because of the individual business or the sector? Unless you use benchmarking, you don’t know.”

Benchmarking can be utilised to help create progressive salary bands, or compare your total rewards package against your competitors.

If you are offering the same base pay, and your competitor offers a better pension or more attractive benefits, unless you’ve received benchmarking information, you may not be aware of that gap and how that could be impacting your ability to recruit for similar roles.

As employees become more productive, salaries are not reflecting this.

According to the Office for National Statistics, employee output is increasing 0.5% quarter on quarter, even with Covid-19 and furloughed workers.

Total hours worked also increased 2.5% quarter on quarter as restrictions unwind and we return to more normal economic activity.

This can increase the risk of employee retention, particularly if your employees are being offered higher salaries or better benefits elsewhere.

We also see echoed throughout our research that remote and flexible working are becoming increasingly popular, and are strong motivators for workers looking for a change.

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How we help

Salary and diversity are hot topics, and are becoming even hotter topics given the pandemic, the great resignation, the anti-work movement and potential employees wanting more transparency from HR and recruiters alike regarding salary and rewards.

Our benchmarking service not only offers these different kinds of benchmarking, but we also provide research and insight that can help shape future hiring strategies. Information on job titles, years of experience and how that compares against salaries, gender availability, and talent availability within a geographic area are all insights we can deliver on and tailor towards your business’s needs.

We can also uncover a wealth of information including:

  • Competitor insights, such as organisation design, benchmarking and hiring activity.
  • Candidate motivations to understand whether your offering meets their needs, values and preferences.
  • Employer brand perception externally
  • Insights about the labour market, employment statistics and salaries.
  • Location insights to guide decisions about relocations, new offices or facilities or switching to remote or hybrid working models.
  • Best practice as an employer, helping you understand the strategies of other businesses, either competitors or market leaders.

We work in partnership with our clients to ensure that we uncover the insights you need but our extensive experience means we can also guide you about the key metrics that will have an impact internally. We use a mix of primary and secondary data to ensure the insights we provide are robust and reliable.