6 Strong Reasons Why a Salary Benchmark Tool is Critical For Salary Comparison
As employee retention becomes more of a focus than recruitment, it’s vital that companies can offer competitive salaries. Creating a competitive benefits package that’s regularly reviewed can help boost engagement and performance—which in turn can keep employees satisfied in their work.
But these salary reviews need to be backed up with accurate market data. That’s where a salary benchmarking tool comes in, and we’ve rounded up six reasons how this can help transform your compensation strategy from ordinary to outstanding.
Why use a salary benchmarking tool?
Many companies find it a challenge to manually collect compensation data to compare salaries with their competitors. Salaries aren't always published in recruitment ads, and while salary listing is becoming more common, this isn’t an efficient or effective strategy.
To find compensation data, HR departments may spend time trawling through competitor job adverts, asking potential employees for their previous pay (which isn’t allowed in some countries), or looking at reviews to get an indication of salary ranges. Unfortunately, relying on the data from these strategies can simply perpetuate the pay inequity that forward-thinking companies are trying to move away from.
Instead—shifting towards using a salary benchmarking tool can have a transformational effect on how you approach salary comparison in the UK.
The 6 reasons why every business needs a salary benchmark tool
From driving equity through transparency to helping you attract top talent and boosting retention, there are so many reasons to use a salary benchmarking tool. Here are six of our favourites.
#1 To boost employee retention
When employees know they’re being compensated equitably, they’re much more likely to stay loyal to a company. Retention is predicted as a key HR trend for 2023, and using salary benchmarking is a great way to show employees you value their time and effort.
#2 To drive pay transparency
Pay transparency is becoming more important, as companies realise that doing so can boost trust and retention. From a basic level of transparency where companies explain how each employee’s salary is calculated, to full transparency, a benchmarking tool is vital so that companies can explain how and why they make compensation decisions.
#3 To attract top talent
It’s true that retention is becoming as (if not more) important as talent acquisition, but companies still need to attract and hire top talent. Being able to set competitive yet realistic salaries is easier when you’re able to benchmark compensation and structure your salaries the right way.
#4 To access the most up-to-date data
Trawling through competitors’ job adverts or asking potential employees about their previous salary (which by the way is considered discriminatory across the EU) isn’t an effective way to set salaries. The good news is that using a salary benchmarking tool is an extremely effective way to compare your compensation with the competition! This technique helps you base salary decisions on the most up-to-date data, so you can amplify pay equity.
#5 To make the most of your budget
Many companies are trying to balance the need to set competitive salaries and retain the top talent with inflation, market adjustments, and budget cuts. Using a salary benchmarking tool helps you balance setting competitive wages with allocating your budget to the right places. This is exactly what Treatwell did when they used our salary benchmarking tool to help drive sensible budgeting decisions.
#6 To address unconscious bias
Relying on asking interviewees for their previous salary, or expecting employees to ask for a raise are two perfect examples of how unconscious bias can help perpetuate pay inequity. One way to remove this bias is to use a benchmarking tool to set and compare salaries, so you know you’re making equitable decisions based on data, not emotions.
Best practices when using a salary benchmarking tool
Salary benchmarking tools are amazing—but they’re still a tool. For the biggest impact, there are a few best practices to follow when using them.
Keep lines of communication open
One vital aspect of pay transparency is communication so that employees can understand the rationale behind their salary decisions. Having a clear communication plan helps drive trust. Employees don’t have to compare salaries themselves, only to find someone who earns more than them for doing the same job. By communicating your compensation decisions (and having robust data to back those decisions up) you can make sure all employees understand how their salary is calculated.
Define your level of transparency
If full pay transparency feels a little overwhelming to start with, remember there are lots of different levels of transparency. We’ve outlined them all in this post. While your goal for the future might be full transparency, you might choose to start by explaining your rationale for salary decisions, using data to back up your reasoning.
Align with your compensation philosophy
Using a salary benchmarking tool to set compensation is a great way to reinforce your compensation philosophy. This is a statement that outlines expectations around compensation and is an essential aspect of company culture and values. We’ve outlined some examples of compensation philosophies in this post.
Set salaries by specific filters
For the most accurate results, it’s essential to filter any data within a benchmarking tool. By filtering by industry, company type, location, job level, and more, it’s possible to refine the results and get a truly accurate picture of what the compensation for a specific role should look like.
Preview the Figures app and discover how our salary benchmarking data can help you drive business growth and pay equity, the easy way.
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That's why we created Figures, you don't need to be a compensation expert, we are. With our an all-in-one compensation platform updated in real-time, expert HR and People insights, we want to make your job more efficient and power more fair decisions.
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