In the current job market, money talks.
Though an attractive salary is not the be-all of a competitive job offer, companies across various industries are offering pay rises in response to rising inflation and the recruitment climate.
For example, 85% of UK law firms are reportedly planning to increase staff numbers in 2022, leading to an average wage increase of at least 5% to secure the best employees in this sector.
What’s more, experts predicted that senior professionals in the IT and finance sectors would receive even larger pay increases in the first quarter of 2022 alone, following the reopening of the economy after coronavirus lockdowns.
Across sectors, competition is heating up for the top talent, and businesses must make job offers that meet candidate expectations in the post-pandemic world. So, how can benchmarking salaries help employers ensure they are offering fair wages that match workers’ skill and experience levels?
What is salary benchmarking?
Salary benchmarking is the process of measuring pay packages against what is offered by other companies.
The benchmarking process involves gathering information on salary and benefits from different external organisations and comparing it with internal data to create competitive job offers. This data can be collected from a range of sources, including:
- Government labour surveys.
- Job market data.
- HR and employee-reported aggregate data.
- Compensation surveys.
- Insights from industry professionals.
These averages should not be the only indicator for setting salaries, but they can provide valuable information to guide pay negotiations and ensure offers keep up with the competition.
Why is it essential to get salary right?
In today’s world, it is not enough to simply create a job spec and hope that the right person applies for the role. To attract and retain the top talent, employers must carefully consider the recruitment landscape and candidate expectations — especially regarding salary.
Salary is often the first thing someone will look at when considering a new job. In fact, an analysis of job adverts on Reed.co.uk in 2021 found a 27% increase in the number of applications for positions that disclosed salary information.
Additionally, the UK government recently announced a pilot pay transparency scheme. The initiative encourages organisations to display salaries in all job ads to help close the gender pay gap — even more reason to ensure salary offers are fair and well-founded.
It is also important to remember that salary averages change throughout the year depending on economic factors. For example, the Office of National Statistics (ONS) detailed how the coronavirus pandemic impacted average earnings data in its ‘Employee earnings in the UK: 2021’ report. So, it is not enough to conduct this research just once — or even annually.
Employers should be analysing their competitors and adjusting their offers accordingly throughout the year to ensure they are offering a reasonable and appealing deal, particularly during periods of economic disruption when salary can be the deciding factor for candidates.
What is involved in a successful salary benchmarking strategy?
Salary will always remain important to candidates — especially in today’s economy. With the rising cost of living and many people feeling the pinch, the best candidates are unlikely to stick around for a lowball wage. As a result, 44% of employers have responded to recruitment difficulties by raising pay.
However, without assessing industry averages, employers may as well be plucking numbers from thin air. A thorough salary benchmarking strategy can help employers ensure job offers align with industry and candidate expectations.
Outline a benchmark plan
A basic salary benchmark framework involves defining the internal role (including job requirements and attributes), sourcing relevant salary data and then comparing the most similar internal and external job descriptions to find an accurate average.
This process can take a long time, so employers should determine a timeline, budget and long and short-term goals for their salary benchmarking project before getting started.
Refine job descriptions
Complete and up-to-date job descriptions are essential for salary benchmarking. So, any company wishing to conduct this assessment should ensure every job role has an appropriate description.
Many job specifications may share the characteristics of similar job titles. As a general rule, employers should compare descriptions that share 80% or more of the same responsibilities and requirements.
Use a salary benchmarking tool
Several free salary benchmarking software tools are available online that analyse generic information on pay, location and industry. These tools can help compare junior positions and roles that are more common in the workplace.
However, for more senior roles, there are likely to be fewer employees to compare. In this case, it may be necessary to conduct more bespoke research to identify appropriate competitors and comparisons.
Develop the rest of your job offer
Though salary is a key factor, it is crucial not to overlook the rest of the job advert.
Howett Thorpe recently conducted an in-depth analysis of the market trends for salaries within the Southeast’s finance sector in our Salary Survey 2022. The survey revealed that flexibility, support and strong company culture are also crucial for retention.
Today’s candidates are less swayed by a big payout if it does not come with the other perks workers have come to expect. By considering these benefits alongside salary, companies may avoid overcompensating with high wages and appeal to a broader pool of candidates.
Enlist the support of a recruitment professional
Despite its practical applications, setting up a salary benchmark system can drain internal company resources. And whilst free tools can help provide some valuable insights, they may overlook the all-important human element of recruitment.
By outsourcing salary benchmarking to a recruitment consultancy firm like Howett Thorpe, businesses can ensure they gain the most accurate and relevant market data supported by in-depth industry knowledge and recruitment expertise.
Does your organisation need advice on setting the right salary offers in the current job landscape? Contact our team of business support and financial recruitment specialists at 01252 718777 or email farnham@howett-thorpe.co.uk to find out how we can help.