It’s not a secret that the modern workplace is still employee-led.
The introduction of hybrid-working has effectively let the genie out of the bottle, acting as a catalyst for the conversations around empathy, flexibility and pay transparency that are shaping the modern office.
For employers, it remains vital that they adopt more employee-first policies and provide flexible working, fair compensation and more diverse benefits packages if they want to remain competitive.
Despite this, a big part of enticing, and retaining, key talent is still about how much you’re willing to pay. Data shows that salary is still the number one reason many people take a job and if the money is too low, many employees simply won’t join a business.
This is where concepts such as salary benchmarking come into play. Aside from providing actionable data for businesses to use, salary benchmarking is a way for employers to remain agile, identify market trends early, establish pay structures and lay out a compensation strategy.
Below we take a look at what salary benchmarking is, the benefits of salary benchmarking, how to conduct salary benchmarking and the various salary benchmarking tools you can utilise.
What is salary benchmarking?
Salary benchmarking is a key concept in the professional services industry, often used by employers to support recruitment efforts, boost retention rates or navigate a company restructure.
Fundamentally, salary benchmarking is the process of evaluating the salary package of a certain role in an industry, comparing these findings with competitors across the industry and then using this information to create an average industry salary ‘benchmark’.
Information gathered from the benchmarking process can be used in a variety of ways but the goal for employers is usually to gather data that can inform internal company policies over the long-term.
Typically, employers will use the data to compare the compensation they’re offering against other competitors in the field and make adjustments based on the findings. This ensures they’re not only attracting new talent but retaining the skill sets they already have in the business.
Some employers may use benchmarking to set salary ranges for new roles being introduced, particularly across completely new departments that have never been part of the business before. In this case, benchmarking removes any guesswork and improves efficiency during large recruitment drives.
Finally, if a company is looking to restructure itself, move into a new field or is undertaking a large merger or acquisition, salary benchmarking is a great way to evaluate job titles and company size, as well as the average salary across the business, and look at where there may be opportunities for promotion, employee engagement or redundancies.
Read the AD 2026 Salary Guide
What are the benefits of salary benchmarking?
What the main goal of salary benchmarking is usually to inform company direction, there are several different secondary benefits it can offer savvy employers:
Improve recruitment efforts
As we’ve already mentioned, a key part of retaining star talent and employing new staff is ensuring you’re offering a competitive pay package whilst also standing out from the crowd. You need to create a reason why you are the market leader and salary benchmarking is a great way of achieving this from a compensation perspective.
If you have exciting job titles with competitive salaries, all based on market rates, geographic location and salary trends, you’ll find it much easier to attract an experienced and highly-skilled professional that can take your business to the next level.
The modern market is also still extremely candidate-led, meaning that employers aren’t often the one in control. You’ll find that these days, the employee is usually the one choosing where to work and the pool of active candidates is typically very small.
With this in mind, it’s vital that you’re approaching recruitment as an exercise in employee empathy, rather than simply screening hundreds of CVs. Salary benchmarking is just one tool in your arsenal and can help build the framework for a more employee-led workplace, which in turn will help you drive success.
Improve retention
A key problem that many employers face is retaining star talent or even maintaining a low rate of employee turnover. While growth is important, having a revolving door of people coming in and out of the business only ever lowers overall morale, despite what you may hear some ‘influencers’ say about new blood or a fresh perspective.
At the same time, if you’re constantly hiring, it’s much more likely that you’ll experience a ‘bad hire’, which can cost your business thousands of pounds for little-to-no return.
This is why employee retention is such a hot topic. It not only removes the need for ongoing recruitment but ensures a happier team and provides more opportunities for internal training and upskilling, which in itself is incredibly cost-effective.
Effective salary benchmarking leads to competitive pay, which makes it harder for competitors to poach staff and ensures a consistent, efficient operation from day-to-day. It’s important to remember that while employee benefits, flexibility and empathy are all part of the wider conversation, salary remains one of the main reasons people leave a role.
Provide competitor research
It’s always a good idea to have a better understanding of your competitors, what they’re offering and how they’re operating in the market.
Competitor research is useful in a variety of ways and you’ll find that salary benchmarking is just one option in a wider arsenal.
If you can get a rough idea about how much your competitors are offering their staff, you’re in a much better place to position yourself as a market leader whilst also overhauling your salaries and benefits based on reliable data sources.
At the end of the day, recruitment is all about culture fit and compensation. Can you offer a better experience than your competitors? If the answer is yes, you’ll find the entire process of building a business much easier.
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How do I do salary benchmarking?
While we know why salary benchmarking is useful, how do you actually go about it?
In our opinion, the best option is to take a multi-channel approach. You’ll want to leverage a mix of tools, resources and data sources to build out a wider bank of salary information.
For example, you might start with some cursory searches on a job search site. Take a look at the various roles across your business and what other companies, both in and outside your field, are offering for similar positions. Always remember at this point that geography and company size are the main variables to consider when it comes to benchmarking.
Once you’ve got this basic framework, it’s time to start digging deeper. You may want to look at more specific roles, advanced benefit packages or even start filtering information based on experience. This is where working with a third party can help.
Recruitment agencies, such as us here at Alexander Daniels, often have access to salary information across hundreds of employers simply based on our time in the market. We’ve been operating for over 16 years, meaning we have a good idea of how the market has shifted, what roles are worth today and what may happen in the future.
Now that you’ve collated all of this data, it’s time to implement it into your company actions. Next time you recruit for a role, consider looking at the data you have available and set pay scales accordingly. If you’re looking to expand your business with a new division, you’ll find that your salary data is a great starting point for working out what you’ll need financially.
The key is making sure you actually use the data you find, not just perform the process and then leave it by the wayside.