Salary benchmarking is the process of comparing your organisation's pay rates against market data for similar roles, industries, and locations. In a competitive labour market, getting your pay right is critical for attracting talent, retaining key employees, and managing payroll costs effectively.
Why It Matters
- Recruitment — underpaying means losing candidates to competitors; overpaying wastes budget
- Retention — employees who feel underpaid are more likely to leave. Replacing an employee typically costs 6-9 months' salary
- Equal pay compliance — benchmarking helps identify and address gender or other pay gaps before they become legal claims
- Budget planning — data-driven pay decisions help control payroll costs
- Employee motivation — fair, transparent pay builds trust and engagement
How to Benchmark
- Define the roles — compare like-for-like based on responsibilities, not just job titles
- Choose data sources — salary surveys (e.g., CIPD, Glassdoor, ONS data), recruitment agencies, industry reports
- Consider your market — benchmark against your sector, company size, and geographic location
- Review total reward — salary is only part of the package; include benefits, pension, holiday, and flexible working
- Set pay ranges — create min/mid/max bands for each role to guide pay decisions
When to Benchmark
- Annually as part of pay review planning
- When creating new roles or writing job descriptions
- When experiencing high turnover in specific roles
- When employees raise pay concerns or equal pay questions
- After minimum wage increases to check compression
Our HR support service includes salary benchmarking and pay review guidance. Get in touch.