Salary Benchmarking: Are You Offering Competitive Packages?

In an ever-changing labour market, ensuring your salary packages are competitive is key to attracting and retaining the best talent. Salary benchmarking — the process of comparing your pay rates against the wider market — is no longer a ‘nice-to-have’; it’s an essential business practice.

But what does effective salary benchmarking really involve? And how can it help your organisation avoid costly recruitment mistakes or staff turnover?

Let’s dive in.

What Is Salary Benchmarking?

Salary benchmarking is a systematic way to compare your company’s pay rates with similar roles in your industry and geographical area. It helps you understand if you’re paying too much, too little, or just right, and guides you in setting salaries that align with market realities.

Why Should You Care About Salary Benchmarking?

1. Attract Top Talent

   Good candidates don’t just want any job — they want fair compensation reflecting their skills and experience. If your salary offers fall behind market standards, you risk losing great hires before you even get started.

2. Retain Your Current Team

   Underpaid staff are far more likely to look elsewhere. Salary dissatisfaction is one of the biggest drivers of employee turnover, which is expensive and disruptive.

   
   

3. Maintain Budget Control

   On the flip side, overpaying can drain resources unnecessarily. Benchmarking ensures you’re competitive without wasting money.

4. Support Diversity & Inclusion

   Regular benchmarking can reveal pay gaps or inconsistencies, helping you create a fairer workplace where all employees are valued equally.

   
   

How to Conduct Effective Salary Benchmarking

Here’s a step-by-step guide:

1. Define the Roles Clearly

Make sure the job descriptions you benchmark are accurate and detailed. Comparing dissimilar roles won’t give you reliable insights.

2. Use Reliable Data Sources

Trusted sources include:

• Office for National Statistics (ONS) pay data

• Industry salary surveys (e.g., Reed, Hays, or sector-specific reports)

• Professional bodies (e.g., CIPD, Nursing & Midwifery Council)

• Recruitment agencies with market knowledge (like Mercury Careers!)

3. Consider the Whole Package

Don’t just focus on base salary. Include bonuses, pension schemes, health benefits, flexible working, and perks. Candidates increasingly look beyond pay alone.

4. Localise Your Benchmarking

Salaries can vary widely depending on location. Pay for a role in London will differ from the North East, so tailor your research accordingly.

5. Analyse and Adjust

Identify where you sit relative to the market median. If you’re below, consider increasing offers or improving benefits. If above, review to confirm your budget aligns with business priorities.

6. Review Regularly

The job market moves fast. Make salary benchmarking a recurring process — at least annually — to stay competitive and compliant.

Practical Tips for Implementing Salary Benchmarking

• Engage Your Stakeholders: Involve HR, finance, and line managers to ensure alignment on salary strategy.

• Communicate Transparently: If you make changes, be open with your team about the why behind adjustments.

• Use Technology: Salary benchmarking tools and software can streamline data gathering and analysis. Some popular platforms in the UK include Payscale, Glassdoor, and Salary.com.

• Combine with Market Trends: Keep an eye on wider employment trends, like rising living costs or skills shortages, that impact pay.

Common Pitfalls to Avoid

• Using Outdated Data: Market salaries fluctuate — relying on old information can misguide your decisions.

• Ignoring Non-Salary Benefits: Perks and flexibility often weigh heavily in candidates’ minds.

• Overlooking Legal Requirements: Remember the National Minimum Wage, Living Wage Foundation rates, and gender pay gap reporting obligations.

Final Thoughts

Salary benchmarking isn’t just about numbers; it’s about creating a fair, transparent, and attractive workplace culture that supports your business goals. When done right, it equips you to compete effectively for talent, manage your payroll wisely, and keep your workforce motivated.

If you’re ready to review your pay structures or want expert guidance, the team at Mercury Careers is here to help. We combine deep industry knowledge with up-to-date salary insights to support your recruitment success.