Using salary benchmarking to overcome the talent crisis

Are you paying your employees enough? For businesses to stay competitive, up-to-date knowledge of market trends is vital – and that includes salary information.

With the unemployment rate rising to the highest it has been since the post-pandemic lay off, research conducted by the Learning & Work Institute showed that the UK talent crisis is predicted to cost the country £120 billion by 2030.

Variations in pay could be the difference between retaining or losing top talent. So, developing an equitable workforce who feel valued and appreciated is a key part of navigating the talent crisis.

Head of Reward Services at Moore Kingston Smith, Sally Elcome provides strategic reward solutions to help organisations navigate the talent crisis. Here, she explains why regular salary benchmarking is more important than ever and shares her tips on carrying out your own benchmarking.

What is salary benchmarking?

Salary benchmarking is competitor research which focusses on pay. It’s something that is often overlooked but can be crucial in retaining and attracting top talent.

The idea is to get a clear understanding of the current salary trends in your sector by collecting current information about salary — as well as other elements of an employee’s remuneration package, like benefits, bonuses, commission, perks, and shares from your competitors — and comparing it against your own data.

By periodically reviewing the salary package that your company is offering against competitors, you can identify any fluctuation in the market and any potential flight risks. You’ll also be in a position to create a competitive environment within your organisation to retain, attract and reward employees.

4 tips for carrying out salary benchmarking

Wondering how to conduct salary benchmarking? Use these tips below to bootstrap your process.

1. Identify relevant job roles and functions

You may find that your competitors have different titles for roles with very similar responsibilities. You’ll probably have varying job titles for similar roles across your organisation, too.

To make sure that you take any specific skills within the different roles into account, it’s a good idea to refer to the job descriptions. That way, you can match them with like-for-like roles in your organisation and see how the salaries compare.

2. Source reliable salary data

Published data from pay surveys in your industry are an excellent source of salary data, as they indicate what employees are currently being paid — not just what firms are offering new hires.

You can typically find salary surveys in HR publications and data-sharing networks, but be aware that the published data may not be the most up to date.

Recruitment sites will also give an indication of what salaries for new hires could look like. However, be aware that this data only represents a moment-in-time and is specific for that role within that organisation.

To be assured you’re getting up-to-date, reliable salary data, you could use a salary benchmarking consultant like Moore Kingston Smith. We access up-to-date market databases to get the latest salary and total cash and non-cash benefits for roles and have access to live job board analysis, which provides a secondary validation for market trends and market movements over the last 12 months.

We’re able to use all this data to provide a salary range for each role, along with market trends and total remuneration – helpful for planning people growth, as well as future budget proposals.

3. Analyse and interpret the benchmarking data

It can be time-consuming to compile and analyse the data yourself, which is why paid, aggregated data may be worth the expense.

If you do analyse the data yourself, make sure to clearly document the approach you take to reach the final benchmark. Detailing the methodology you use will help when it comes to reviewing the process in six or 12 months and you’ll have a documented audit if there are any challenges to salary changes.

4. Create fair and competitive salary ranges

Once you have competitive market salary data, you’re in a position to create fair salary ranges for each role. When you’re deciding on a salary range, it’s helpful to think about the maximum salary range spread you want to have between the entry-level and most experienced employees within that role. That will also help how you determine salary reviews for your team.

Think about your compensation strategy when hiring, too. Consider a mix of the median salary figure for the majority of your roles and above median salary for those hard-to-recruit or niche roles.

A real life example of success: delivering 1233% return on investment

The Moore Kingston Smith Reward Services team carried out a salary benchmarking exercise for a global client covering numerous departments and countries and evaluating around 100 roles.

The challenge

Our client was finding it difficult to carry out their own meaningful salary benchmarking, primarily because their job titles were quite niche and they had no job hierarchy in place.

How did salary benchmarking help solve this?

We provided reliable salary benchmarking data from trusted sources and backed it up by insight, analysis and information from our own data gathering. We determined the correct market comparators for our client and a benchmark for their positioning in the sector.

What was the result of using salary benchmarking?

A personalised action plan to tackle issues on talent acquisition and employee turnover, working with them on a longer term to implement a robust reward strategy.

The client started to see the benefits of a robust salary benchmarking exercise almost immediately after implementing salary changes. After a year, they saw their employee turnover reduce by 19% and a positive impact on their profit, saving around £400,000 on recruitment costs alone.

At our 12-month post-project review, we learned that this project had delivered an impressive 1233% return on investment for our client.

Find out more about our salary benchmarking services with Moore Kingston Smith

Get in touch with our reward services team to find out more about our salary benchmarking methodology and follow-up services, including creating a targeted action plan to make your overall remuneration package more attractive.