Pay Benchmarking: How to Stay Competitive in 2025

As we head into 2025, top talent continues to demand the best. And as trends like remote work, pay transparency, and sustainability reshape compensation, businesses need to adapt and evolve — or risk losing out to the competition. 

Step forward, pay benchmarking. Fast becoming a critical element of employee retention strategies, here’s why pay benchmarking is so critical, and how HR teams can use it to gain a competitive edge. 

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What is Pay Benchmarking and Why is it Important?

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Pay benchmarking or salary benchmarking, involves aligning salaries at your company with others in the same industry or region. 

This process helps support fair pay practices by creating competitive compensation packages that align with market rates. As a result, companies with a strong pay benchmarking process often find it easier to attract and retain top talent — because people want to work for companies that are open about how their salaries are determined. 

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Key Trends Shaping Pay Benchmarking in 2025

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Pay benchmarking has evolved over the years — from a closed process that might be based on old, inaccurate data, to a transparent strategy based on the latest research. As we head into 2025, these are the key trends shaping pay benchmarking.

1. The rise of remote and hybrid work

For many companies, remote and hybrid work is now the norm, not the exception. This shift influences how companies carry out benchmarking, with factors like regional market rates and the cost of living in different locations impacting the process. 

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2. An increased focus on pay equity and transparency

More than ever before, employees want to know they’re being paid fairly. But even that’s not enough. They want to know how their salaries are determined. Benchmarking is a critical aspect of the move towards how companies can ensure equitable, transparent pay practices are upheld across all roles and demographics. 

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3. Data-driven decision making

Wave goodbye to time-consuming, manual data collection. These days, data analytics and AI are shaping how companies carry out benchmarking. These tools don’t just help companies make better decisions based on accurate data, they also help speed up the process and help ensure accurate results. 

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4. Environmental, social, and governance (ESG) initiatives 

ESG initiatives are another way for for companies to stand out. Pay benchmarking helps drive fair and transparent compensation practices, boosts employee well-being and satisfaction, promotes ethical decision-making, and helps meet local and international requirements for pay transparency. All this helps companies demonstrate their commitment to meeting the social and governance pillars of ESG initiatives. 

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Conducting Effective Pay Benchmarking for Your Organization

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Ready to get started with pay benchmarking? Here’s what to cover:

• Identify key roles for benchmarking: While the goal is to benchmark all salaries, it makes sense to start with key roles that significantly impact business outcomes. 

• Gather market data: While benchmarking used to rely on salary review sites, industry reports, or professional networks — there’s a better way. Compensation management platforms like Figures offer access to the best quality data, updated in real-time and tailored to your company’s size, industry, and location. 

• Use pay benchmarking tools: Using compensation software like Figures, PayScale, and Mercer to complete the pay benchmarking process turns a time-consuming process into something easy and intuitive. 

• Analyse and apply the data: Collecting data is one thing — knowing what to do with it is another. Key tasks to complete during this stage include identifying and resolving any salary outliers, creating salary bands for each role, and obtaining approval from your leadership team for any changes. 

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Using Pay Benchmarking to Stay Competitive in 2025

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Job seekers and existing employees are becoming more discerning about the companies they want to work for. And if companies aren’t transparent about how their pay is calculated, 68% of employees say they’d be willing to switch jobs.

That means pay transparency is quickly becoming a key strategy for companies looking to stay relevant and competitive into 2025. Here’s why.

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Attracting top talent

Pay benchmarking helps companies determine the most competitive salary for each position — while remaining within budget. By aligning salaries with market rates, and openly advertising these salaries, it’s much easier to attract top talent who will be comparing your vacancy with similar roles. 

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Retention through fair compensation 

Attracting top talent is one thing, but retaining them is just as critical. Benchmarking helps create a process for salary reviews as employees grow and develop. The salary bands created alongside pay benchmarking show employees what to expect when they progress, which helps boost retention, motivation, and performance. 

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Optimising compensation strategies for business growth 

As your company grows, so must your compensation strategy. Pay benchmarking helps HR teams create scaleable strategies that grow alongside the business. Using compensation software also means it’s easy to view salary benchmarking data for larger companies, helping you plan when forecasting budgets. 

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Choosing the Right Pay Benchmarking Tools and Resources

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The success of the pay benchmarking process depends on the tools and resources available to HR teams. Here’s what to look for when choosing the best options for your company: 

• Data sources: There’s a lot of salary data out there, but not all of it is accurate. Relying on benchmarking data from salary review sites like Glassdoor, word-of-mouth from HR teams at other companies, or out-of-date industry reports isn’t a sustainable strategy for benchmarking success. A far better alternative is salary data analysis that’s industry and region-specific, tailored to your company’s size. 
• Custom vs. generic data: General market data is useful for providing a broad overview, but when you have access to custom data — that’s when the real magic happens. Being able to compare your salaries to other companies in your region or industry is essential, especially if you’re in a specialised industry and need to ensure market-aligned pay or conduct custom pay surveys for niche roles.  

Luckily, pay benchmarking tools have done all the hard work for you, offering access to top-quality, relevant data, updated in real time. 

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The top pay benchmarking tools 

Here are three of the best pay benchmarking tools, designed to make the pay benchmarking process as efficient and easy as possible:  

1. Figures: Europe’s leading compensation management platform, Figures offers a range of products including pay benchmarking. The platform includes instant access to a large dataset of reliable benchmarking data, updated in real-time. 
2. PayScale: This platform offers access to an extensive database of compensation insights from a wide range of industries, locations, and job titles. 
3. Mercer: The extensive salary surveys and databases offered through Mercer help companies design comprehensive salary surveys, and gain insights into total compensation trends. 

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Implementing Pay Benchmarking Best Practices

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For the best impact, we recommend following these pay benchmarking best practices:

• Regular updates and adjustments: To stay in line with market rates, benchmarking should be conducted annually. For dynamic, fast-moving industries or during economic shifts, six-monthly reviews may be more appropriate. 
• Internal communication and transparency: Employees should be kept informed about the benchmarking process from the very start. A compensation communication plan can help create consistent guidelines, so everyone stays on the same page. 
• Aligning benchmarking with business goals: 

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Embracing Pay Benchmarking for a Competitive Edge

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As HR teams develop their compensation strategy for 2025 — pay benchmarking is one of the best ways to stand out from the competition and gain a competitive advantage. But for best results, it’s important to choose the right tech, and follow best practices. 

Ready to see where pay benchmarking can take your company in 2025? Book a free demo of Figures to find out more.