Why companies need to Benchmark their Salary Scale?

15 May 2016

Companies often worry whether their senior executives’ remuneration packages are in line with those offered by other companies of similar size and industry. Small number of employers have access to this information, and gaining it can be challenging. To attract senior executives’ the company must compete and be aware of what the market is paying for certain skills and develop fair and reasonable salary ranges in their companies accordingly. Salary benchmarking can help companies to overcome these issues.

What is salary benchmarking?

Salary benchmarking is a process that gives a complete breakdown of the compensation package allowing companies to compare salary and benefits available within specific sectors and named companies. It is a much more exact science, much more focused and detailed process than a traditional salary survey.

The information that companies obtain from salary benchmarking A list of companies sorted as follows:

# Pos. size sector basic salary cash bonus share bonus long term incentive plan (LTIPs) pension
Com1 CEO              
Com2 CEO              

  How to get this information?

The majority of companies list these information within the annual reports and publish it for the public. But, for companies to obtain the meaningful results, they will have to search in large volumes of these reports, not to mention that it will be hard to analyze the data. It is a common procedure for companies to hire a third party, such as Bakkah Inc., to carry out this work and therefore save a lot of time and effort.

Why is salary benchmark considered important for companies?

  1. Reduce the risk of losing top executives as a result of better offers paid by competitors.
  2. To prove to their shareholders in black and white that their senior staff provide value for money.
  3. These then give a clear indication of how their directors’ pay compares with the market.
  4. To see what other companies in your region are paying, which can aid both recruitment and retention.
  5. It helps to maintain your company’s reputation.

6 Steps to Create a Salary Benchmarking

  1. Do job descriptions. You should have job descriptions for everyone in your organization. They will be essential for matching skills, responsibilities and experience to each job position, since you can’t count on salary benchmarking surveys to use the same job titles that you do.
  2. Plan. Start building the salary benchmarking plan.
  3. Determine the purpose. Salary reviews? Is there a team that the organization may be over‐ or under‐ paying? Are you losing top performing employees or struggling to recruit fresh talent into a particular area of the business?
  4. Establish the goals. For example, to reduce management pay by 10 % in the next 18 months. Or establish a 5 % pay increase for key players that can stave off a retention issue you’re having. You will use these goals later to measure your project’s success.
  5. Outline your approximate budget and resources needs.Normally, there are two major costs to conducting a market study – salary benchmarking data and HR consultant time. If you plan to do the study in-house, you’ll only need to budget for benchmark survey data. If you choose to use outsourcing, don’t forget to add HR consulting fees into your budget, and understand what’s included upfront. So, take time to find out what the outside research will cost and if you need to include internal time, or consulting fees.
  6. Craft a timeline.Having your goals in mind, you can now create a timeline for your salary benchmarking project. If you’re a company with high employee turnover, you may need a shorter timeline so that you can perform an external market study once a year. If you’re hiring less frequently, you can likely complete a study every 18-24 months.


  Bakkah team for training and consulting

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