Compensation benchmarking, or salary surveys are exercises conducted to identify levels and boundaries related to pay grades for a set of positions. Ideally a benchmarking exercises should be undertaken keeping a sample of comparable companies in related business or businesses employing similar manpower. Ideally, the business size has to be near similar – but we can have a few businesses which are much larger to enable a diverse data set.
Some reasons for getting compensation benchmarking done at your business.
- It helps you justify the pay recommendations. You have a data backed justification for your pay decisions – increments, corrections and new hiring’s. You can tell the business team, that their pay hikes was decided based on market benchmarks.
- It’s not just for the teams. Salary survey allows the HR & the business head to substantiate their recommendations to be able to convince the board & promoters on need for a raise or a cut.
- Benchmarking, allows you to get realistic about your talent strategy. Depending on how deep your pockets are – you can plan on the type of manpower you can afford and hire – source, target companies etc. This in turn helps you to appropriately identify companies from where you can hunt talent, or strategise around alternatives.
- Benchmarks can help your business decide it’s positioning on compensation front. For Ex – Company A, may want to be called the best pay master and would always look at top talent at top pay, and Company B, may want to be called an okay pay master that strives to hire value for money talent. Being realistic, helps convey the right message to the job applicants and insiders.
Some more reasons, on a lighter note:
- Compensation benchmarking exercise, allows the HR Head or the Compensation Leader to add another line item and another accomplishment for HR review meetings.
- This allows the HR to convince their business teams that there is a logic to the proposed super increments or freeze on compensation etc.
- Salary survey, also allows the HR & the business to spend some valuable dough and concretise their relationship with some consulting company. The more the money the better global brand you can hire to commission the survey.
Praveen is the Founder & Principal Consultant of KHEdge, a boutique HR & Business Process Advisory firm. Over last 15 years he has advised & worked with promoters, founders, business leaders, HR leaders in areas of - Business Strategy, HR Strategy, Organisation Design etc.