Why Benchmarking Salary Data is Important
June 14, 2023
By Emily Fioravante, courtesy of SBAM-approved partner ASE
Earlier this month, ASE released the results of the 2023 Compensation Survey. What makes our survey unique is the employer-reported benchmarked data – with a 65% constant sample (companies who report year after year.) This year’s results show larger than normal wage growth due to inflation and other economic factors.
The key findings from the survey are as follows.
- Based on the companies surveyed, wage increases among Michigan businesses showed a growth of 4.4% from 2022 to 2023.
- In response to the prevailing economic conditions, approximately 40% of participants have implemented salary increases exceeding the standard levels for their hourly and professional staff.
- Nearly 40% of organizations have adjusted their salary budgets to account for inflation, resulting in average salary budgets of almost 4% in 2023 as a percentage of total payroll. Salary budgets refer to those funds allocated and used to determine salary increases for their employees.
The survey covers roughly 500 positions. 65% of the survey participants are located in the Metro Detroit region and slightly over 70% of the organizations that responded reported having 500 employees or less.
In today’s competitive job market, attracting and retaining top talent is crucial for the success of any organization. One significant aspect that influences an employee’s decision to join or stay with a company is the salary offered.
Employers who wish to remain competitive and fair must engage in the practice of benchmarking salary data. This process involves comparing compensation packages against industry standards, regional averages, and similar job roles. In this article, we will explore why benchmarking salary data is vital for employers.
Attracting Top Talent
Offering competitive salaries is essential for attracting and hiring top-tier talent. Candidates evaluate multiple job offers based on various factors, and compensation is typically one of the most critical considerations. Benchmarking salary data allows employers to gauge the prevailing market rates for specific roles and ensure their offerings are in line with or surpassing industry standards. By doing so, employers can position themselves as desirable employers and enhance their chances of securing talented individuals.
Retaining Skilled Employees
Benchmarking salary data is not only relevant during the hiring process but also for retaining skilled employees. A comprehensive salary review ensures that employees are compensated fairly for their contributions, skills, and experience. When employees feel their compensation aligns with their market value, they are more likely to remain engaged and committed to their work. In contrast, paying below market rates can lead to frustration, demotivation, and ultimately, attrition. Regularly reviewing and adjusting salaries through benchmarking helps employers maintain a competitive advantage in retaining their top performers.
Internal Equity and Employee Morale
Benchmarking salary data also promotes internal equity within an organization. Ensuring that employees in similar roles receive similar compensation helps foster a sense of fairness and transparency. When employees perceive the salary structure to be equitable, it boosts morale, reduces resentment, and creates a harmonious work environment. Benchmarking allows employers to identify and rectify any pay disparities, promoting a culture of equality and fairness.
Market Positioning and Competitiveness
By benchmarking salary data, employers gain insights into their market positioning and competitiveness. Understanding how their compensation packages compare to other companies within the industry is vital for talent acquisition and retention strategies. If an employer consistently falls below market rates, it can be challenging to attract and retain top talent. Benchmarking helps identify areas where adjustments need to be made to ensure the organization remains competitive in terms of compensation.
Compliance with Employment Laws
Benchmarking salary data aids employers in complying with employment laws and regulations. Various jurisdictions have specific legislation regarding minimum wage, equal pay, and fair labor practices. By comparing their salary structures against industry standards, employers can ensure they meet legal requirements and avoid potential legal disputes. Regularly benchmarking salary data helps organizations stay up to date with changes in laws and regulations, reducing the risk of non-compliance.
Benchmarking salary data is a critical practice for employers seeking to attract, retain and motivate top talent. It provides valuable insights into industry standards, allows organizations to remain competitive, promotes internal equity, and ensures compliance with employment laws. By incorporating salary benchmarking into their compensation strategies, employers can build a reputation as fair and desirable employers, ultimately contributing to the success and growth of their organizations.