Compensation Benchmarking

Compensation Benchmarking, popularly known as Salary Benchmarking, has become a very important tool in today’s cut-throat competition of employers to hire and retain the best of the talent. The organisation’s growth depends on having the best talent on board and the best talent can only be retained with the right scale of compensation in place. Not only this, companies might even save unnecessary costs with the help of Salary benchmarking. Since the advantages of the exercise are many, let’s find out the list of advantages that this exercise offers:

Advantages of Salary Benchmarking
  • Provides Market standard salary ranges
    • Helps in retention of best talent
      • Provides better foundation for attracting the best talent
        • Can help save organisation’s expenditure by identifying unnecessary costs
          • For companies with headquarters in other countries, this third party survey provides a valuable insight on real pulse of the local employment market
          • Companies can decide a comprehensive Compensation Philosophy on the basis of the benchmarking exercise done
          • The ideal career growth charts can be made by referring to the benchmarking stats
          • HRs can have a substantiation for the right salaries being offered
          • Competitor employer’s strategies can be studied through this exercise

          Types of Salary Benchmarking Exercises

          1. Generic
          2. Tailor-made


          The generic salary benchmarking refers to the methodology where the entire industry or all types of employers in a particular industry or segment are considered while performing the salary benchmarking. This type of compensation benchmarking does not provide a detailed finetuning to the organisation’s exact requirements as there may be various scales of operations, locations, types of products and services, etc, within the same industry and those nitty-gritties don’t appear in the stats in generic survey.

          Tailor-Made Survey:

          A tailor-made survey provides the beneficiary organization with the exact fitment amongst the competitor employers. This type of survey gives liberty to the extent that even the competitor employers can be handpicked by the organization against which they wish to have benchmarking done. In this type of survey, the companies not only get the salary benchmarks but also they get to know the strategies used by competitors, trends in competitors, this year’s percentage of hike, market standard job titles and many more. So tailor-made survey or a specific survey is now a days quite popular amongst various organizations. Even IT Salary benchmarking has become a market buzzword and companies are getting quite good results in terms of insights of the competition about market standard salaries.

          Case Study

          A medium scale IT company with it’s headquarter in US was looking for a solution to problem of high employee attrition. Much was debated between the local HR team and the global strategic team about what should be the market standard salaries of various roles present in the organization. However, there was no solid substantiation linking the attrition to the non market standard salaries. Thus after a lot of research the local HR team came found service providers for IT salary benchmarking. Finally the details of all providers were handed over to the strategic team and they decided to pick Eminent Management Consultants as the preferred service provider for their IT compensation benchmarking exercise. Eminent Consultants worked on their requirement, understood the roles, created role matrices, identified target employers, launched the surveys, did the analysis and provided ready results in a detailed report which could be referred for the advisable strategy for market standard compensation.

          The strategic team after referring to the content was so impressed, that they even wanted to conduct the survey every year to understand the better ways of marking compensation. The company used the compensation philosophy to find the current gaps in their own compensation structure. The company was even able to save unnecessary costs and was able to increase retention through the exact identification of market standard salaries.

          In a nutshell, many of the challenges of the organizations pertaining to hiring best talent, retention of best talent and making themselves great employer brands can be solved with the help of Compensation Benchmarking.