The Importance of Compensation Benchmarking in Talent Retention
Companies are constantly in search of the best retention tools to retain top talent. While retention strategies are multi-layered, a critical piece is how organizations approach compensation for talent. Benchmarking compensation is often a step missed by smaller organizations, but we are seeing a pivot in the market amongst our clients.
Compensation benchmarking, also known as salary benchmarking, compares a company’s internal salaries to external market averages. In addition to talent retention, the benefits of compensation benchmarking allow companies to position themselves within the market to attract top talent, create appropriate workforce investment budgets, and promote higher employee engagement.
From a compliance standpoint, compensation benchmarking positions will play a critical role for an organization to align with all the current, and anticipated, pay transparency legislation. Multiple states are beginning to establish requirements around disclosing pay ranges even on the job ads posted.
When benchmarking within the market, there are several considerations a company should artfully review. To begin building your foundation, one of the best results a benchmark analysis can provide is establishing a baseline for a company to understand its current position.
Factors that influence salary benchmarks can include industry, geographic region, revenue, organization size, education levels, cost of living, and more.
Employers should also grasp a firm understanding of which markets they should consider in their efforts to gather accurate, relevant data. For example, if you are shifting to a remote workforce, you may now be competing at a national level for talent, as opposed to local, when your staff was onsite.
While there are many layers to a well-built compensation plan, visibility into your current market position will allow your organization to shape a transparent plan, starting with your philosophy on how you approach compensating your talent.
PBO Advisory has supported many of our clients with developing or refining compensation plans that align with their people strategy. For more information on our Human Capital Consulting services, including assistance with compensation benchmarking, please contact Consulting Chief People Officer Nicole Devine.
Consulting Chief People Officer
858-622-1681 Ext. 287