The Benefits of Preparing a Salary Benchmarking Plan
It’s tempting to skip the salary benchmark planning and just jump right in, but performing a salary market study – and doing it well – means getting all the way through a daunting, time‐consuming task. And remember, you’ll need to spend money on this project, and whenever you’re spending company money, you want to make sure it’s spent wisely. A benchmarking plan will help. Don’t worry about the length of your plan. Depending on the scope of the project, your salary market study plan can range from one page to five‐pages, listing out an overview of what you hope to achieve through salary benchmarking.
How to Create a Salary Benchmarking Plan
1. Complete your job descriptions. Make sure you have written job descriptions for everyone in your organization. You don’t need them to be 100% complete, but they will be essential for matching skills, responsibilities and experience to each job position, since you can’t count on salary benchmarking surveys to use the same job titles that you do. If you’re crafting job descriptions from scratch, be sure to check in with employees or managers and get them to sign off on the duties, education and experience required for each job position.
2. Build your plan. Next, start building your salary benchmarking plan. The plan can be flexible, but it should provide you with a decent guidepost to where you’re heading. Plus, it should be written so that others know why, how, and when you’re performing this study. Open up a fresh document and get started!
3. Understand your purpose. Let’s start with the why. You’re interested in salary benchmarking for a reason. What is it? Do you support an annual effort to perform salary reviews? Is there a team that the organization may be over‐ or under‐ paying? Are you losing top performing employees or struggling to recruit fresh talent into a particular area of the business? Whatever your reason, your written objective should tie back to your business purpose for performing the salary benchmarking study.
For example, you could summarize your purpose by saying, “We are conducting a salary market study because finding a strong leader in quality assurance has been challenging since our compensation offers are not competitive enough. The engineering group needs QA talent to support our initiatives and keep our business on track for Q4 2009. If we don’t ship our product on time, we risk losing 30% of our projected profits. This external salary market study will ensure that we are offering competitive pay and benefits for our positions.”
4. Establish your goals. Your goals might be set by you, or they may be decided by another leader in your company. For example, you could be asked to reduce management pay by 10 percent in the next 18 months. Or you might be working to establish a 5 percent pay increase for key players that can stave off a retention issue you’re having. The more specific you make your goals, the better. And keep your list down to 2‐5 primary objectives; any more and you may lose focus during the process. You will use these goals later to measure your project’s success.
Setting goals will also help you prioritize which employees, teams or talent you should focus on first, especially if your company has more than 100 employees. After all, you can always perform additional salary benchmarking studies to manage less‐critical groups later in the year.
5. Outline your approximate budget and resources needs. Normally, there are two major costs to conducting a market study – salary benchmarking data and HR consultant time. If you plan to do the study in-house, you’ll only need to budget for benchmark survey data. If you choose to use outside help, don’t forget to add HR consulting fees into your budget, and understand what’s included upfront. So, take time to find out what the outside research will cost and if you need to include internal time, or consulting fees.
Remember, salary market studies are a time‐intensive project. Be sure to set aside plenty of time for matching, analyzing and setting your pay rates. Once you have chosen your research tools you’ll have tighter figures.
7. Craft a timeline. Having your goals in mind, you can now create a timeline for your salary benchmarking project. Good questions to ask yourself are, “How long will this take?” and “What are the major milestones along the way?” Keep your priorities and the scope of your study in mind. And be sure to pad your timeline by a couple of weeks, to account for those unexpected tasks and other projects that inevitably come up in your daily job.
If you’re a company with high employee turnover, you may need a shorter your timeline so that you can perform an external market study once a year. If you’re hiring less frequently, you can likely complete a study every 18-24 months.
Planning for Salary Benchmarking Success
Determining the appropriate salary benchmarks for individuals in your company is essential to your business for a number of reasons. Salary benchmarking helps you attract and retain talent, create and keep a competitive edge, manage the bottom line, and maintain your organizations’ reputation. And, by taking the time to plan ahead before you spend money and time on the effort, you’ll be more assured of success.
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