Why Is Salary Benchmarking Important To A Company? April 17, 2017
Recognising and rewarding your employees can be as simple as a pat on the back to offering a better pay package. What is important is that you need to let them feel valued, recognised and rewarded for the contribution they make to your business. While people do not often switch jobs for the sake of money alone, but if you underpay, it is a definite de-motivator. Offering better remuneration is significant, both in attracting a candidate to join your company or retaining your existing talents. The 2016 survey by the global recruiting firm Hays showed that 43 per cent of job hunters in Singapore are most motivated by a better remuneration package.
It is therefore important for businesses to keep their remuneration packages competitive to attract and retain the best talents. Failing to keep up with market competition can lead to loss of valuable employees which will in turn lead to loss in productivity and increase in costs. This is because in today’s competitive market, you may end up paying market value for the replacement in addition to training expenses incurred.
The best way to work out what you should be paying your employees is to look at what the market is paying and balance it with your company’s profitability. You can get information from contacts in your network, salary survey reports by reputed research organisations and Human Resource professionals/agencies.
Human capital costs represent a significant portion of most companies’ cost bases, and benchmarking will help businesses to understand the influence of supply and demand on the cost of labour. It will also help companies to continuously improve practices and processes related to their strategic goals and objectives.
Benchmarking provides companies a sound understanding of the salary and employment trends, helping them make informed and effective pay decisions including hiring, promotions, salary adjustments, and staff remuneration budget planning. When done well, companies will be able to set the right compensation package which will help create a work environment that recognises and rewards employee performance as well as establish a strong culture of employee engagement. This will in turn motivate employees toward achieving business goals and create a talented and engaged workforce that will power companies to drive forward.
Tips To Help Achieve Benchmarking Success
- Create a plan. Start off with a list of job descriptions for every staff in your company. This will enable you to match skills, responsibilities and experience to each job position.
- Understand your purpose for performing this study. Ask questions like “Do we do it to retain talents” or “We are facing difficulties in recruiting” etc. Then, establish your goals which will help you prioritise which employees or departments you should focus on first.
- Set your budget as well as your time line and resource needs. You will need to budget for salary benchmarking data. Plus, if you are using external resources, you will have to factor in the HR consulting fees into your budget as well .
The bottom line is that creating a compensation structure that is tailored to your company’s goals can save a lot of time and resources. It will also strengthen your business as it will help you maintain valued staff and recruit skilled candidates, giving your business a competitive edge. And by taking the time to plan before embarking on the benchmarking, you will be more assured of success. To understand more about how salary benchmarking can support employee retention strategies, speak to one of our consultants at enable Consulting.