Overpaying. Underpaying. How does your business compare when it comes to compensating your employees? If you have ever had to work out a salary package for a new employee or have had to evaluate a pay rise request or negotiate to retain one of your best employees, you’ll know that it can be pretty tricky working out what is fair and reasonable and if you are underpaying or overpaying. Hence the importance and value of undertaking salary benchmarking.
They say “data is the new oil” and that’s very true when it comes to salary benchmarking data. Never has it been easier to access salary comparison data to help you understand and compare how your business compares from a region, industry and job perspective when it comes to compensating your employees. And, no longer is salary benchmarking simply about the dollars. Many businesses continue to innovate in the employee compensation area. We regularly see new and different perks being packaged into employees’ salary packages to increase the value of their compensation.
Salary benchmarking has become a much more common process with the existence of salary packaging agencies, the rise in salary survey reports and leveraging technology to access data. But are you doing it and should you be? I’m seeing more and more businesses take advantage of salary benchmarking to arm them with the data they need to make informed business decisions and we are experiencing increased enquiries about “what should I be paying my employee?” That can be pretty tricky to work out if you don’t have your finger on the pulse with award rates, market rates and industry trends.
If you’re not salary benchmarking here’s why we think you should consider it:
- Retention of employees – If you can avoid ever being in the situation where your best talent resigns to go to your competition you want to make sure its not because you have slipped behind the eight-ball in compensating your employees. Knowing how you compare with salary compensation will tie in directly with your employee retention strategy. Replacing talent is not cheap and takes time, could that investment be put to better use in compensating your existing employees?
- Pay rise requests – As a business owner or manager you have no doubt had an employee approach you asking for a salary increase because they feel they are worth more. Sometimes their request is justified and sometimes it’s not. How do you know when it is justified? Having a pay rise request conversation is going to have a much more positive outcome, regardless of if you agree to the increase or not, if you have salary data to present to the employee. When your feedback and decision is based purely on your opinion instead of accurate and unbiased data and fact, the negotiations can start to be perceived as personal and unjust. Evidence is the best resource in managing pay rise requests.
- Workforce Planning – Salaries can often be the biggest expense a business has. We are seeing more and more businesses who have to tender for projects and contracts, want to better understand and estimate their salary costs not just for today and tomorrow but for the life of the work they are pitching for. Salary benchmarking can assist you in improved salary compensation budgeting and can help you to get innovative. What else can you offer your employees to engage and retain them? It doesn’t always have to be about the dollars and based on various employee surveys, dollars are not the number one motivator.
- Attracting new talent – Skills gaps and shortages continue to be a challenge across various industries for businesses and understanding where you fit in the market from a salary compensation perspective is going to be crucial for your recruitment strategy. From understanding how to initially attract new talent to your business through to negotiating the placement and salary package, what you have to offer and how you compare to your competitors and in the local marketplace is key to successful negotiations.
Salary benchmarking is a valuable business tool. Armed with salary data you can proactively work out where you want to position yourself in the market place. It doesn’t always pay to be the highest payer nor does it pay to be the lowest. Do you know how your business compares?
