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class="btn-apps-dropdown-footer"><a href="#" class="font-weight-bold w-dropdown-link">Sign out</a></div></nav></div></div><a id="navbar-trial-btn" href="https://auth.tellent.com/sign-up" class="btn btn-primary-contained navbar--btn start_my_free_trial_btn w-button">Try free 18 days</a></div></nav></div><div class="menu-button-2 w-nav-button"><div class="w-icon-nav-menu"></div></div></div></div></div><div id="post-header" class="blog--header"><div class="container w-container"><div class="blog--category-hero-section"><div class="post--hero-copy"><div class="breadcrumbs"><a href="/blog" class="breadcrumbs--item-link">Blog</a><div class="breadcrumbs--container"><div class="breadcrumbs--divider">></div><a href="/category/hr-processes" class="breadcrumbs--item">HR & processes</a></div><div class="breadcrumbs--container w-condition-invisible"><div class="breadcrumbs--divider">></div><a href="#" class="breadcrumbs--item w-dyn-bind-empty"></a></div></div><h1 class="post--hero-title slideup blog-article-title">What is salary benchmarking? A helpful guide for recruiters</h1><div class="post--hero-details"><div class="post--hero-details-block"><div>Last updated: </div><div class="post--hero-date">January 12, 2025</div><div class="post--hero-date w-condition-invisible">January 30, 2025</div></div><div class="post--hero-details-block w-condition-invisible"><div class="post--hero-minutes w-dyn-bind-empty"></div><div>min read</div></div></div><div class="written_by">Written by</div><div class="post--hero-author"><img height="70" loading="lazy" width="70" alt="" src="" class="post--hero-author-img w-dyn-bind-empty"><div class="post--hero-author-details"><div class="post--hero-author-name">Guest Author</div><div class="post--hero-author-company w-dyn-bind-empty"></div></div></div><div class="post--hero-second-author"><img height="55" loading="lazy" width="55" alt="" src="" class="post--hero-second-author-img w-dyn-bind-empty"><div class="post--hero-second-author-details"><div class="post--hero-second-author-name w-dyn-bind-empty"></div><div class="post--hero-second-author-company w-dyn-bind-empty"></div></div></div><div class="written_by contributor">Contributor</div><div class="post--hero-contributor"><img height="55" loading="lazy" width="55" alt="" src="" class="post--hero-contributor-img w-dyn-bind-empty"><div class="post--hero-contributor-details"><div class="post--hero-contributor-name w-dyn-bind-empty"></div><div class="post--hero-contributor-company w-dyn-bind-empty"></div></div></div></div><img height="" loading="lazy" src="https://cdn.prod.website-files.com/60870cca519aca7849a9262d/67974b781ee89f6962ed918f_analyzing%20salary%20benchmarking%20(1).jpg" alt="salary benchmarking" sizes="(max-width: 479px) 93vw, (max-width: 767px) 96vw, (max-width: 991px) 94vw, (max-width: 1279px) 48vw, 558px" srcset="https://cdn.prod.website-files.com/60870cca519aca7849a9262d/67974b781ee89f6962ed918f_analyzing%20salary%20benchmarking%20(1)-p-500.jpg 500w, https://cdn.prod.website-files.com/60870cca519aca7849a9262d/67974b781ee89f6962ed918f_analyzing%20salary%20benchmarking%20(1)-p-800.jpg 800w, https://cdn.prod.website-files.com/60870cca519aca7849a9262d/67974b781ee89f6962ed918f_analyzing%20salary%20benchmarking%20(1).jpg 930w" class="post--hero-img"></div></div></div><div class="post--wrapper"><div class="container w-container"><div class="post--content w-row"><div id="toc" class="post--toc w-col w-col-4 w-col-stack"><div class="post--toc-container card-shadow"><div class="post--toc-title">Table of contents</div><div class="toc"></div></div></div><div class="post--copy w-col w-col-7 w-col-stack"><article id="article" class="post--text w-richtext"><p>It’s a highly competitive business environment out there and many companies are looking to fill similar roles from the same pool of candidates. Finding ways to attract new talent is crucial. </p><p>Given that<a href="https://cognatiosolutions.com/what-do-job-seekers-prioritize-the-most/"> 47% of job searchers</a> cite compensation and benefits as the single most important consideration when deciding which role to accept, knowing how to calculate a fair pay offer is essential.</p><p>This article explores how salary benchmarking can help by providing a robust basis for pay decisions. We’ll look at what salary benchmarking is, a few of the benefits it offers to businesses, and go through how to do it, step by step.</p><h2>What is salary benchmarking?</h2><p><strong>Salary benchmarking involves researching average salary rates for given roles across your sector. </strong></p><p>Doing this means you can offer competitive salaries and compensation packages to both new hires and current employees.</p><h2>The nuances of benchmarking salaries</h2><p>At base, salary benchmarking is about determining the market rate for the job. But of course, this can be easier said than done. For one thing, not all job roles that have the same titles are identical in terms of the responsibilities involved or level of experience required, so selecting a fair basis for comparison can be complex.</p><p>Then, there’s the fact that being able to control labor costs is a key aspect of managing a business successfully. After all, it’s one thing to establish what a fair salary is for a particular role, but it’s quite another to be able to pay it.</p><p>Smaller companies or new startups can be at a disadvantage here compared to big players. But on the whole, it’s better to have a good grasp of industry norms anyway. Even if you only have the budget to lowball the expected salary ranges, you can still offer competitive compensation by exploring options for providing additional benefits.</p><p>That’s why some think it’s more accurate to use the term “compensation benchmarking”, since it’s the complete compensation package that’s most relevant. After all, being happy at work is a core goal for many people. If you can offer candidates extra paid time off or implement an<a href="https://www.workhuman.com/platform/social-recognition/"> employee recognition platform</a>, that’s valuable.</p><p>In any case, accurate salary benchmarking is becoming ever more important in today’s competitive job market. Many US states have enacted salary history bans—in other words, they prohibit asking candidates to disclose their previous salary. If you employ anyone located in these states, you can’t use that information to gauge a fair offer.</p><figure style="max-width:940px" class="w-richtext-align-fullwidth w-richtext-figure-type-image"><div><img src="https://cdn.prod.website-files.com/60870cca519aca7849a9262d/67974593b0790a605a191426_AD_4nXev0ErAdHFLbx7PM-wnt8R48bcOTYSctoV96fphMpzg5cUhhj0JnsJrazpMAue5q_p_7glbM-UZmuCiBDHA8WV56Npb0IZiMpPfOnUxMau9QYUV9WrL5L8HRVLl-Dn3xA5r6aTN1YiVk32xzdi96V2mlNJN.png" loading="lazy" alt="Map showing states in the US with salary history bans "></div><figcaption>Image sourced from <a href="https://www.paycor.com/resource-center/articles/states-with-salary-history-bans/" target="_blank">Paycor</a></figcaption></figure><h2>5 Advantages of salary benchmarking in recruitment</h2><p>So, what kind of advantages does salary benchmarking bring to a business? Let’s take a look at some of the main benefits.</p><h3>1. Attract top talent</h3><p>The first benefit of salary benchmarking on our list is perhaps the most obvious one—it helps you attract the best workers.<a href="https://recruitee.com/articles/top-talent"> </a></p><p><a href="https://recruitee.com/articles/top-talent" target="_blank">Hiring top talent</a> is always a challenge. They have options, and you need to make sure your company stands out if you want them to come and work for you instead of the competition.</p><p>Not every top performer will be entirely money-focused, of course. But they’ll certainly expect to be compensated at least in line with current market rates. And it’ll be difficult for you to establish enough of a competitive advantage to attract the top people if you have no understanding of the broader market salary rates that have become the industry standard.</p><h3>2. Ensure competitive compensation</h3><p>Remaining competitive in your field involves a wide range of considerations. Most companies have strategies for competing on customer-focused elements such as price or good service. But some organizations make the mistake of neglecting the human resources angle. It’s just as important to remain competitive at that end of business.</p><p>What’s more, regular salary benchmarking is now more crucial than ever in light of the recent increase in pay transparency laws, which force employers to disclose an accurate salary range in job ads. These have been enacted in a number of states, most notably<a href="https://www.willkie.com/-/media/files/publications/2022/new_york_city_and_california_pay_transparency_laws.pdf" target="_blank"> California and New York</a>.</p><figure style="max-width:967px" class="w-richtext-align-fullwidth w-richtext-figure-type-image"><div><img src="https://cdn.prod.website-files.com/60870cca519aca7849a9262d/679745940b9f48e231f26fc4_AD_4nXeutAPu7WQkAaRJiZqb3AOzgU71NAD2xo_olvCRgRltEnJ7BwIPEwqm4oEMddNVOPw9tNGAzJQRZs9qwTdYQSfm1Adljc2mXLJN529ZgCeiZL9ac4auVF34RGyxc3g26vT6bkdxx1qfL15sfu1So95tff8H.png" loading="lazy" alt="Map showcasing pay transparency laws by state in the US"></div><figcaption>Image sourced from <a href="https://www.infographicbee.com/pay-transparency-laws-by-state/" target="_blank">Infographicbee</a></figcaption></figure><h3>3. Boost employee retention</h3><p>Your compensation strategy is a key factor not only in recruitment but also in staff retention. We’re not just talking about the role of salary benchmarks in<a href="https://recruitee.com/articles/internal-recruitment" target="_blank"> internal recruitment</a>, although that’s an important consideration.</p><p>More broadly, there’s the question of implementing fair compensation for existing employees. The phenomenon of wage compression is a very real one, particularly in times of relatively high inflation. If starter salaries rise faster than salaries for existing employees, there comes a point where the falling differential between the two can lead to serious employee dissatisfaction.</p><p>With a well-planned salary benchmarking process, you can make informed decisions about how to adjust pay fairly. This boosts employee morale, driving down turnover while increasing retention rates.</p><h3>4. Promote pay equity</h3><p>One of the trickiest problems to resolve in recruitment and setting salaries generally is achieving pay equity. The reasons for this are complex, but it’s probably fair to say that pay negotiation on a case-by-case basis creates opportunities for unfair pay gaps to emerge.</p><p>It’s difficult to imagine a business world where there’s no negotiation around pay whatsoever, of course. But certainly, reducing your reliance on it can be useful if you’re trying to implement fair pay practices. Any business aiming to reduce racial, socioeconomic, or<a href="https://recruitee.com/articles/gender-inequality" target="_blank"> gender inequality</a> in the workplace will certainly find that salary benchmarking helps, since it codifies pay expectations in line with the market average.</p><h3>5. Support strategic planning</h3><p>If you integrate your salary benchmarking process into your broader business operations, you’ll find it can be helpful for improving strategic planning. </p><p>You should combine your salary benchmarking reports with reports from your other <a href="https://www.sage.com/en-us/accounting-software/spend-management/" target="_blank">spend management software</a> and tools. In doing so, you can monitor department budgets, examine current and benchmarked salaries, and then confidently plan your future growth and staffing budgets. </p><p>The important thing is that you have to keep up to date. Track set salary ranges on a regular basis so that your knowledge of job market trends and broader market expectations remains current.</p><figure style="max-width:1033px" class="w-richtext-align-fullwidth w-richtext-figure-type-image"><div><img src="https://cdn.prod.website-files.com/60870cca519aca7849a9262d/679745934d1e20ef37e8c0aa_AD_4nXfXjGe8137CHpr5rbtAPFyyA1r6Qp1d6yqD0IFHVj-whZTUCpUCHuNst1_kBPMh_0R7QSSEZq-V9HFl18QK5LuyVQg1SJYqQsUYzKzb1_haB-PLjoFQIlxSMCRD5oLPD_RRWbGMkySKxB5_UXuX8_pFeptl.png" loading="lazy" alt="Job evaluation methods"></div><figcaption>Image sourced from <a href="https://www.netsuite.com/portal/resource/articles/erp/salary-benchmarking.shtml" target="_blank">NetSuite</a></figcaption></figure><h2>How to implement salary benchmarking in your organization</h2><p>So, how do you go about researching the correct salary range to offer for different roles? Finding that sweet spot between offering too much and too little is the goal, but it can be a challenge. It’s vital to take a systematic approach that follows these core steps.</p><h3>Identify benchmark roles</h3><p>First, decide which roles you’re going to focus on benchmarking. You don’t need to do everything at once. The choice of which roles you’ll be focusing on will depend on a number of factors, including:</p><ul role="list"><li>Which roles you’re planning to hire for soon</li><li>Whether there are any roles that have unusually high rates of employee turnover</li><li>Which roles you need to standardize pay for</li></ul><p>To help you understand where to focus your efforts, look to your HR and project management tools for insight. </p><p>You can use generic tools, such as time-tracking software, to gauge which teams are over-working and will likely need more investment. Or, even better, use industry-specific tools, such as <a href="https://www.sage.com/en-us/sage-business-cloud/intacct/product-capabilities/extended-capabilities/professional-services-automation/" target="_blank">professional services automation software</a>, to anticipate project needs so you can maximize resource efficiency and confidently forecast when new talent is needed. </p><p>When it comes to identifying benchmark roles, the key is to map the needs of your business. This will allow you to build up a reliable and relevant internal salary database over time and attract the talent you need to keep scaling smoothly. </p><h3>Gather market data</h3><p>When deciding which roles to use for benchmarking, study job descriptions to make sure you’re comparing like with like. Then, look for reliable sources of data such as:</p><ul role="list"><li>Reputable salary surveys</li><li>Industry reports</li><li>Industry surveys</li></ul><p>Access to salary information for individuals is often off the table for privacy reasons. But many reputable sources make aggregated data available. For companies in the US, one excellent resource is the<a href="https://www.bls.gov/bls/blswage.htm" target="_blank"> Bureau of Labor Statistics</a>, which provides a wealth of information broken down by industry, state, and individual area.</p><p>It even devotes a section to breaking salaries down by job characteristics, including the level of difficulty or complexity the work entails.</p><figure style="max-width:940px" class="w-richtext-align-fullwidth w-richtext-figure-type-image"><div><img src="https://cdn.prod.website-files.com/60870cca519aca7849a9262d/67974593c8be290d0447dc23_AD_4nXcv1Lznmk8it_RkvZtLqXveezTMxUcAl7COsRiG_1_kODH3LBxoILiPs5nCTQOjiAZcZsjk8W-mHWJjoHvPHKMeVK2M5TQx2GBO0x3IyKaYJgkpmo8fLTCbAi2KZTsv9TheaZ19V4IdRU6PQ0_4PrsZAUx2.png" loading="lazy" alt="Average hourly waves for registered nurses in 2022"></div><figcaption>Image sourced from <a href="https://www.bls.gov/bls/blswage.htm" target="_blank">U.S Bureau of Labor Statistics</a></figcaption></figure><h3>Analyze and interpret data</h3><p>For each role, find the current market salary range and take the midpoint. Then, compare this to the salaries you’re paying at the moment. In many cases, you’ll probably find they’re similar, although be ready for the occasional surprise, particularly if you’re researching some more niche or specialist roles for which there’s a dearth of equivalent roles to compare in the data sources.</p><p>Then, consider the spread. It’s likely that the salary range you offer within your own organization will have a smaller spread than the full market one. In any case, this is where you need to be careful to stick to your budget. </p><h3>Adjust salary structures</h3><p>Finally, adjust your salary structures according to the new information. Decide upon a salary range for each role that will be competitive enough to attract high-caliber candidates, but not so high that it could undermine the bottom line.</p><p>Don’t forget to benchmark salaries on a regular basis. Market conditions can evolve very fast, and you need to keep up with what current compensation packages look like at all times to remain competitive.</p><h2>Final thoughts</h2><p>Salary benchmarking isn’t just about attracting top talent—although that’s certainly a big reason why many companies do it. It also provides a whole host of other benefits that can elevate your business.</p><p>It’s a good way of boosting employee morale (and, as a result, <a href="https://recruitee.com/articles/retain-and-develop-employees" target="_blank">employee retention</a>), promoting pay equity, and supporting more nuanced strategic planning for the long term. 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