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              
COO              
CFO              
Com2 CEO              
COO              
CFO              

  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

Related Articles

Recruitment Consulting - Concept and Solutions

The term “Recruitment consulting” might sound a little bit odd, sinc...

Read More

Importance of Human Resources Management

Human resources is considered one of institution’s most important assets, ...

Read More

Recruitment challenges in Saudi Arabia linked with Saudization and Nitaqat

In the last few years, the recruiting industry has witnessed big changes as the ...

Read More

Why do you need to do training needs analysis (TNA) for your organization

Effective training or development depends on knowing what is required for t...

Read More

Organizational Structures Challenges for Retail Industry

The organizational structure could be described as the human body skeleton. The ...

Read More

Why companies need to Benchmark their Salary Scale?

Companies often worry whether their senior executives’ remuneration packag...

Read More

Why do you need to conduct HR assessment?

Why do you need to conduct HR assessment? One of the most important processes ...

Read More

Why should you apply Diversity and Inclusion in your organization?

What is diversity? Diversity in the workplace is understanding, well-perce...

Read More

What is Employer Branding?

Employer branding is the process of creating a unique employer’s repu...

Read More

3 Simple Steps to Assess High Potential Employees

We live in a time in which the standard of success in business changes dramatica...

Read More

How HR Maintenance Improves Job Commitment

The competition of organizations does not limit to more profit, but it depends o...

Read More

The People Capability Maturity Model (PCMM)

In today’s hyper-competitive business environment, companies are facing tw...

Read More

HR Manual

When a new employee started his first day at specific organization, he felt conf...

Read More

Total Rewards Strategy

Deloitte defines total rewards as “the critical integration of a...

Read More

Roles and Functions of Human Resource Management

Human resource management (HRM) involves the management of an organization&rsquo...

Read More

Why Employer Branding Is Important for Your Company’s Hiring Success

Branding is often associated with the marketing side. Your company logo and bran...

Read More

How to Write a Competency Framework: An Ultimate Guide

What gets measured gets done, therefore, defining and measuring effectiveness, e...

Read More