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In HR Management Last updated: August 23, 2023
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Salary benchmarking is a crucial strategy for modern organizations to remain competitive in the market, retain their best employees, and continue thriving.

Employees are the backbone of every organization, and keeping them happy is vital in this highly competitive business world.

Today, employees are not only looking for a great work opportunity and company culture but also a handsome salary package.

A business that cares about its employees by offering them the best salaries along with a productive environment attracts the best talents and encourages them to stick with it for the longest time. 

To achieve this, effective strategies like salary benchmarking are helpful. 

Let’s discuss the concept of salary benchmarking, its importance in hiring and retaining your best talents, how to do it, and other details.

What Is Salary Benchmarking?

The process of evaluating the salaries of various job descriptions based on the external worth of an organization is known as salary benchmarking. 

You can also say that it’s the process of comparing employee salaries of one company with the concurrent similar job role salaries of other competing companies in the market, preferably of the same niche.


The process involves analyzing the components of each job position of a company and comparing these positions to the almost similar jobs of other companies. This requires accurate, relevant, up-to-date job market data.

To acquire the job market data for this process, the companies mostly rely on government labor databases and intensive market studies based on compensation surveys. Organizations often offer their employees the best salary packages according to the industrial salary benchmark of the concurrent times. 

In a nutshell, the process of salary benchmarking or compensation benchmarking allows a company to maintain an industrial standard for internal pay rates. This helps them position well in the external competitive market while attracting and retaining the best employees to achieve continuous growth. 

Importance of Salary Benchmarking 

Salary benchmarking is the primary gateway to assigning competitive salaries to the employees of any organization. Almost every worthy employee wants to earn a handsome salary, so organizations must offer them a competitive salary based on their skill sets and market rates.

Furthermore, compensation and job satisfaction are two key components of a job role that attracts worthy candidates. Paying competitive, respectable salaries according to the standard of the employee is crucial. Here, essential salary benchmarking will help organizations attract potential candidates. 

While conducting a detailed salary benchmarking process, the HR of the company must consider multiple elements such as the company’s net worth, revenue, team size, growth metrics, budget, and so on. By adopting appropriate benchmarking, the organization can imbibe productivity and profitability at the same time.

Some of the most important factors that can influence the process of salary benchmarking in any organization are:

  • Industry
  • Educational levels of the employees
  • Living cost 
  • Job description
  • Required skills or specialization credentials 

Now, we will explore the role of HRs in salary benchmarking.

Role of HRs in Salary Benchmarking

One of the core duties of a company’s Human Resources (HR) department is to ensure that the best-fit talent joins the company under specific job roles. Not only joining but ensuring employee satisfaction is the fundamental duty of an HR in any organization. 


A great way to achieve it is by offering the best competitive salary to the employees. This requires the HRs to determine the appropriate compensation for employees. 

The HR department conducts several salary surveys (processes will be discussed below) and facilitates the entire process. Compensation management plays a gigantic role in HR because it largely impacts the hiring process, company performance, team engagement, and employee retention. It is the ultimate gateway for a company to maintain its competitiveness in the market. 

How to Do Salary Benchmarking Effectively 

Salary benchmarking is an extremely comprehensive process panning around several appropriately curated steps. Here is how you can do easy and hassle-free salary benchmarking.

#1. Collect Salary Data 

Conducting the market survey is a crucial and foundational step in conducting salary benchmarking. The HR department must first list the job roles for which they want to conduct salary benchmarking. Next, they must conduct thorough research and collection of the salary data.

You can do this with the help of the following:

  • Salary Software
  • Data Sharing networks
  • HR Publications
  • Data from professional networking sites
  • Custom surveys

#2. Perform Job Audits


Conducting a detailed internal job audit is important. Its primary goal is to catalog the company’s existing and required job roles and find what roles must be added based on the company’s requirements.

In a job audit, HR underlines and properly demarcates the job roles, responsibilities associated with each role, and also the qualifications needed. For each job role, individualized effort on survey and data collection is mandatory.

#3. Make a Compensation Strategy

There is plenty of buzz around salary benchmarking and fair pay to employees. However, it is also crucial that the salary pay of the employees is well aligned with the business budget and other business factors.

Identification of an organization’s job roles, their suitable job description, applicability, and hierarchical grade pay system is essential for outlining the compensation strategy for the current salary range. In this regard, HR could also adhere to the concept of prorated salary, where the employees will be given salaries for the number of days they have worked. 

#4. Salary Range Setting

The HR must determine a maximum and minimum salary for all the job posts as per the competitive salary range.

For example, the front office desk representative salary in the competitive market could be somewhere between $10 to $15 per hour. That is quite a wide range to decide. In such circumstances, it is advisable to stick to the 50th percentile. So, HR can decide the salary range to be somewhere around $12.5.

It’s up to the company to decide what pay they want to offer to the freshers and the experienced candidates. Soon after this, HR must also outline some policies.

For example, a fresher front desk officer will receive $10 during the first six months of their service. After this tenure, they can expect an appraisal rise leading to the highest salary range. 

#5. Document the Result and Seek Approval


Now, it’s time to get the compensation strategy formally documented and approved by the board of directors and management council of the company.

For this, HR must prepare a solid report including all the research work analysis data that was conducted for policy determination and framing. It is also essential to define the strategies for employee promotion during this time and explain the source of all information.

The policies and strategies would be validated only after the company’s management approves them. The HR department may also have to produce a report on how the updated salary compensation modules and packages can attract better talent. Documented results act as excellent sources for the next round of benchmarking in the organization. 

Advantages of Salary Benchmarking for an Organization

Here are the key benefits of salary benchmarking for an organization.

#1. Job Market Competitiveness

The salary benchmarking survey data is a great insight for the HR personnel and the organization to be aware of the market trends and industrial benchmarks for salaries against various job roles. This also allows companies to hunt for qualified professionals in the talent pool.

#2. Attracting Deserving Candidates


Organizations can hardly attract qualified candidates if they do not offer competitive salary packages. By offering competitive salary packages, companies can actually attract qualified professionals instead of having to pursue them. The entire process flow of recruitment can be streamlined by attracting deserving candidates based on their qualifications.

#3. Enhanced Job Experience

Happier employees are statistically more productive at the workplace, which greatly benefits the organization in the long run. Thus, ensuring job satisfaction for the employees is vital to help an organization keep its best talents and continue achieving great heights.

Fair compensation with salary benchmarking will boost the employee’s satisfaction and inspire them to deliver their best for the betterment of the organization. Salary benchmarking also helps organizations to stay updated with the current market salary trends. It is a great way to improve employee morale.

#4. Work Regulation Adherence

An organization can lose its license and reputation, and there could be serious allegations against them if they do not adhere to applicable laws and regulations. 

With salary benchmarking, an organization can adhere to the appropriate labor laws. It ensures that the organization is aligning well with federal and state regulations. Factors such as equal pay, minimum wage, or taxes are taken care of while doing salary benchmarking.

#5. Employee Loyalty


Salary benchmarking is crucial in gauging employee loyalty and retention within an organization. Regularly comparing your compensation packages with industry standards helps you ensure that your employees feel valued and fairly compensated for their efforts.

This, in turn, fosters a sense of loyalty among your staff, reducing the likelihood of them changing the company.

When employees believe they are being paid competitively for their skills and contributions, they are more likely to stay committed to your company. Salary benchmarking allows you to identify areas where adjustments may be needed to prevent your top talent from seeking opportunities elsewhere.

Best Tips for Successful Salary Benchmarking

An organization could lose its reputed and hard-working employees in the long run if they fail in the basic compensation planning. Using transparent and clear benchmarking data improves your strategy and chances of retaining the best talents. 

Here are some tips for conducting a fair and effective salary benchmarking process.

Rely on Trusted Sources

As already discussed, the entire salary benchmarking process largely depends on the data collected through surveys.

So, whether collecting information, it is vital to ensure the information is latest. Only the current information and no other backdated information should be used for the salary benchmarking.


Use reliable sources and always consider re-checking the data twice or more for better results. Online searches to collect detailed results of the hourly or monthly wages of a particular job description can be a tedious task. It is not even wise to trust one source solely.

Always cross-check the data from multiple sources and examine its quality to avoid discrepancies. Believe in the figures presented only by reliable websites. Beware of frauds.

Tally Job Descriptions

When determining the salary of any job role, ensure to match the descriptions properly. For the same position, some companies may consider assigning additional responsibilities. In such cases, there will be a disparity in wages.

So, when searching for salaries, ideally, check the job description so that it closely matches the internal job role you are looking out for. Several other factors to consider in this regard are:

  • The reputation and flagship of the organization
  • Number of reporting heads (for the leadership and managerial roles)
  • The work mode – remote, hybrid, or on-site

These factors closely modulate the wages even in the case of the same job description.


Salary benchmarking is not just about monetary benefits; it can involve various other perks and advantages as well, such as bonuses or provident fund opportunities in the workplace. When pre-fixing the compensation strategy, organizations should ensure that they also take into account costs related to:

  • Performance appraisals
  • Profit sharing
  • Living cost
  • Stock options
  • Paid holidays
  • Retirement plans

Employee insurance benefits are among the major policies of any organization and play a massive role in salary benchmarking. The comparison should be based not only on salary but also incentives, bonuses, and other benefits for a better understanding of the package. 

Make Better Strategies

If an organization is huge and it is practically impossible to conduct a thorough survey or audit of the internal job roles individually for each employee, the best practice is to reach out to department managers.


In addition, try limiting your benchmarking since it is not needed frequently. Though organizations should stay flexible in this regard, annual or semi-annual salary benchmarking could be enough. 

While doing salary benchmarking, also consider the emerging skill sets and market trends. Suppose the market demands your employee to have a new skill set, like knowledge of a certain programming language.

So, you must pay greater focus on hiring employees with the skill and follow salary benchmarking accordingly. The idea is to keep the progress of the organization unhindered. 

Third-Party Services

Many organizations often hire a third-party company to help them with salary benchmarking. There are many payroll service providers in the market that offer such services. For large-scale organizations, it is advisable to take help from third parties because salary benchmarking by HR alone can be very challenging.

Third parties have the suitable skills and software to conduct the process unbiasedly. They have specialized knowledge and technical expertise that adds greater precision and credibility to the process. 


Incorporating market dynamics and skill trends is essential for effective salary benchmarking. As industries evolve, new technologies and skill sets become invaluable. Ensure your benchmarking process remains aligned with these changes. Adjusting your compensation strategy is crucial if the job market sees a surge in demand for a specific skill.

For instance, if roles requiring advanced data analytics skills are in high demand, adjusting your benchmarking to reflect this trend will help attract and retain the right talent. 

Regularly monitor emerging skills and evaluate their impact on job roles within your industry. This proactive approach ensures your organization remains competitive in attracting top talent, even in rapidly changing job landscapes.

Final Words

In this era of stiff competition, employers are leaving no stone unturned to acquire and retain the best talent for their company.

Salary benchmarking helps them achieve that. It is one of the fair and safe practices that enables them to offer competitive salary packages to employees and helps them understand their relative position in the market when it comes to the pay rates of employees. 

Next, check out the best Applicant Tracking System (ATS) tools for any business.

  • Durga Prasad Acharya
    Durga Prasad Acharya is a Freelance Technical Writer who loves writing on emerging technologies, such as AI & ML, Cybersecurity, Web Hosting, SaaS, Cloud Computing, and more. Besides writing, he’s a web designer and is passionate about… read more
  • Rashmi Sharma

    Rashmi is a highly experienced content manager, SEO specialist, and data analyst with over 7 years of expertise. She has a solid academic background in computer applications and a keen interest in data analysis.

    Rashmi is… read more

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