Compensation Benchmarking

Compensation Benchmarking is a process through which an organization can review the industry compensation structure. The results of the benchmarking can then be used to compare the compensation structure followed internally by the organization.

In order to make the Benchmarking effective it is crucial that the industry review is done through a reliable and accurate source. As the decision making is based on the output of the various surveys the authenticity and capability of the partner conducting the survey is very crucial. Various factors that must be considered while conducting surveys for the compensation Benchmarking:

  • Look for Similar/Competing Organization of similar size
  • Make sure that the LocationĀ of the target companies is same
  • Hire an experienced consulting organization who knows how to formalize the survey results

Once you have the desired output you can use the internal salary data to perform the comparison. The comparison would then help you understand where you stand in the industry.

If you are paying less than the competition you are at the risk of losing your manpower to competition. You may either restructure the compensation as per the market standards or find ways to prevent losing your manpower to competition.

If you are paying more than the competition then you may be safe from the competition pressure but your CFO and CEO should be concerned about the potential margin loss. You can plan your annual appraisals to normalize the salaries and include more non-monetary benefits for your employees.

If you are paying as per the competition you may to consider creating some level of cushion by creating a slight edge over your competition. Skill development is one of such measures that can help you increase the retention of your employees and stay ahead of the competition.


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