The world of work is rapidly changing, and the battle for talent is putting increasing pressure on organizations to evolve their compensation strategies. Here are four ways salary benchmarking data can help companies attract and retain top talent in a tight job market.
As the battle for talent intensifies in virtually every industry, companies must work harder than ever to attract and retain talent. Not only are companies struggling to find talent within their own industries, but they’re also competing with organizations outside of their immediate sector.
In order to compete, organizations must have a good pulse on what the market is paying for desired experience and skills. To do this, organizations must have access to salary benchmarking data so they can provide competitive pay to retain existing employees and make competitive offers to win over job candidates.
Understanding the job market using salary benchmarking data
Salary benchmarking data and tools can help companies compare internal job descriptions with similar jobs for a given location to determine whether their salaries are below or above market rate. This insight is especially important for industries that are susceptible to high turnover – such as the tech, retail and hospitality industries – as availability of talent is low and competition is high. Below, we cover four ways organizations can benefit from using salary benchmarking data to attract and retain talent.
1. Determining salary bands
Salary bands must be created to give employees room to grow within their existing role, while also being competitive to retain talent. For example, if a software developer band is $80-100K and the employee hits the maximum pay within the band, there is a higher likelihood that this employee will look for a job at another company that offers more for the same job.
Learn why Ceridian was recognized as a Leader in the 2020 Gartner Magic Quadrant
Comparing internal salary data to industry competitive rates can help leaders and analysts get a better understanding of how the market is changing and what they can do to stay on top of these changes. This is especially beneficial for industries that may not have other differentiating factors to attract and retain talent, such as flexible work hours. A compensation analyst in the retail industry, for instance, must work harder to ensure salary bands remain competitive.
2. Extending job offers to candidates
Most candidates in today’s market often consider several different factors before they accept an offer. According to LinkedIn’s Talent Trends report, the most important factors in accepting a new job include compensation (49%), professional development (33%), and better work-life balance (29%). Although pay is just one of many factors contributing to whether a candidate accepts a job, it still plays a large role. After spending time winning a candidate’s attention then screening and interviewing them, companies can use salary benchmarking data to help make better offers.
Related: The most common reasons candidates reject job offers (and how you can prevent it)
3. Empowering managers to make more informed decisions
Giving managers access to salary benchmarking data provides an added layer of insight to make more informed decisions about merit increases and have open compensation conversations.
For example, managers can bring in salary benchmarking data and align it with an employee’s performance, time in position, and so on, to ensure all factors are considered when determining a merit increase. With this data, managers can also work to retain top performers by gleaning insight into whether they’re paying them below market rate. Managers can then identify areas where they may need to take action to retain an employee who may be flight risk.
Secondly, salary benchmarking data can empower managers to have more informed conversations with employees about pay decisions and how compensation is structured. Ceridian’s 2019 Pay Experience report found only 30% of workers are completely satisfied when it comes to transparency of information about their pay. To retain talent in a competitive job market, companies must work to focus not only on providing competitive salaries but being transparent about how these compensation decisions were made.
Related: Do your employees think that you value their work?
4. Workforce planning
Salary benchmarking data is beneficial for companies that are experiencing growth and are considering opening offices in other locations. In considering where to open the next office, companies must evaluate talent availability versus talent cost. A good example of this is San Francisco where there is a lot of tech talent, but salaries are a lot higher. This means that a company looking for tech talent may have to settle for a smaller talent pool where salaries are lower.
See how Dayforce Compensation leverages data to provide insights for organizations to make informed compensation decisions
Paul is Director of Product Management and has over 18 years of experience in human capital management. He has worked for several SaaS companies, where he managed countless products and the development of major solutions such as global HR, benefits enrollment, performance management and compensation management.View Collection