Salary benchmarking can be as illuminating for businesses as it is for employees. Learning how the salaries you offer compare against businesses of similar sizes, industries or turnover can be an important milestone in keeping valuable staff or reviewing your outlays.
There are hundreds of options when it comes to salary benchmarking – from the Rolls Royce of services that cost a small fortune and provide deep dive analysis, to the cheap and cheerful options that do the job but skimp on detail.
However, before we look at the pros and cons on both, let’s review why salary benchmarking is important and how it can impact your bottom line. The three key reasons salary benchmarking is critical for any business are to ensure the remuneration you’re providing staff is:
Salary benchmarking is a great way to stop and assess the way your business does business with its own people. For example, the discovery you’re paying a top performer a wage that falls below the benchmark gives you the opportunity to mitigate the risk of them walking away. Similarly, wage growth during the WA boom saw many employees receive salaries well in excess of similar positions in other states. Now the economy has corrected, it is pertinent for many WA businesses to reassess and consider pulling salaries back in line.
So, what salary benchmarking tools are out there and which are the best to use?
A simple google search can reveal a lot of basic salary and career data, with free websites such as payscale.com providing ballpark figures for hundreds of jobs. Another free, albeit time consuming, option is to research recruitment sites such as Seek or CareerOnefor roles such as those held by your employees to monitor current wage offerings. You can also use this option to search for similar businesses to see if they have any current job openings with published salary ranges. Job posting site Indeed has salary information across 60 countries, including Australia, taken from 450 million points of data. For example, Registered Nurses salaries in Australia are based on 7430 data points (employees, past and present job ads) in the last three years.
Many recruitment sites feature salary calculators that allow businesses and employees to compare their remuneration to job functions at companies of a similar size within the same industry and region. Page Personnel, Hays and Hudson are some good examples. The benefits of these calculators are they are free, easy to use and provide data quickly. The downside is they often sort via job title and not the actual duties a person undertakes, which can lead to anomalies if it’s the job title, and not the remuneration, that needs review. Additionally, these tools don’t take into account specific circumstances that might be unique to your business, don’t give any context to their results and often provide wide ranges per role category - ie for some roles we have seen a range of $80,000 to $120,000.
This level of salary benchmarking is fine for getting a basic idea of whether your business is on track but shouldn’t be relied upon if you’re concerned about legalities or want full confidence you’re offering compelling wages to the right employees.
Large global HR companies such as Mercer and Aon Hewitt have teams dedicated to salary benchmarking services for businesses. These services utilise dedicated employees who understand market trends and economic impacts to analyse remuneration data while also providing context based on the specific needs of individual businesses. While this provides a level of analysis that will give a business owner or manager full confidence in any consequent decisions, it also comes at a cost.
“Salary benchmarking is a critical tool for businesses, but it’s also important to know they don’t have to spend hours trolling through recruitment sites to gain information that may not relate to them,” says WCA Solutions Principal Heather Warner.
“Similarly, a small business doesn’t need to spend exorbitant amounts on services that are geared towards benchmarking the salaries of executive’s at large, multi-national companies.”
“Salary benchmarking should be about providing business owners with the confidence to manage their staff, and their finances, safe in the knowledge they are acting within the law and in a way that won’t result in the loss of valuable employees to competitors.”
“Recruitment and staff turnover is expensive and remuneration is one of the key measures your employees have of how valued they are. Finding the right salary benchmarking vehicle for your business will definitely ensure a smooth ride for all concerned.”
Contact WCA - People & Culture Solutions if you require any assistance with your Culture, Human Resources and/ or Industrial Relations requirements on (08) 9383 3293 or firstname.lastname@example.org