How to get salary benchmarking right: a quick guide for HR pros

How to get salary benchmarking right: a quick guide for HR pros inn summary:

In this blog, you’ll:

• Learn how to benchmark salaries effectively to stay competitive in the job market and ensure fair, transparent pay across your organisation.
• Step-by-step guide for HR professionals, covering where to find reliable salary data, how to compare roles accurately, and what to include beyond base pay.
• Avoid common salary benchmarking pitfalls and discover how regular reviews can strengthen retention, boost morale, and future-proof your people strategy.

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Salary benchmarking might not be the most rock’n’roll activity on your HR to-do list, but it’s one of the most powerful tools in your people strategy toolbox.

Why? Because when you understand what the market you operate in is paying – and how your organisation compares – you can attract the right talent, keep your existing people happy, and build a reputation for fairness and transparency. All good stuff, I’m sure you’ll agree.

Get it right, and you’ll be seen as a proactive, forward-thinking employer that values fairness and transparency. After all, a reputation that can give you a real edge in a competitive talent market. But, get it wrong, and you’re at serious risk of losing top employees to better-paying (or simply better-informed) competitors.

Still not convinced? Well, did you know that a survey conducted by recruitment firm Robert Half found that over 50% of job seekers are motivated purely by higher salaries, highlighting compensation as a primary driver for job changes? The jobs market may be sparse right now, but given the chance, you can bet a pretty penny that many your workforce would be willing to leave for that little bit extra in their pay packets.

So, whether you’re reviewing pay ahead of performance review season, or simply want to tighten up your reward strategy to ensure you get the best bang for your buck, here’s your quick, practical guide to effective salary benchmarking, and why it matters more than ever in today’s job market.

First things first: what is salary benchmarking?

Salary benchmarking (or compensation benchmarking, depending on who you ask) is the process of comparing the pay and benefits your organisation offers with what other employers are offering for similar roles. It sits at the heart of any good compensation planning strategy, and ensures your business remains competitive, fair, and aligned with market expectations.

It’s how you work out whether your salaries are competitive. It’s also how you identify where you might be overpaying, underpaying, or sending confusing signals about your internal pay structure.

But it’s not just about the number on the payslip. Effective benchmarking looks at the full package – including base pay, bonuses, benefits, flexibility, and even development opportunities. All the things that matter to candidates and employees when deciding whether to stick around or jump ship.

Why salary benchmarking matters more than ever

In the past, employees might’ve had no idea how their salary compared to the wider market. These days? A quick search on LinkedIn or Glassdoor can give them a pretty decent idea of how much their skills are worth, and the rise of pay transparency means expectations are only going to grow.

Meanwhile, cost-of-living pressures, skills shortages, and increased volatility in the jobs market means that competitive pay is no longer just a “nice to have.” Bottom line? If your salary and retention strategies don’t stack up, you’ll feel it in your recruitment pipeline and your retention figures.

On the flip side, clear and fair pay structures help build trust and boost morale, especially when employees understand how their salary is set and how it could grow over time.

So, it’s clear there can be a lot riding on your salary benchmarking activities. The big question is, how can you do it like a pro? Here’s a quick guide on how to tackle salary benchmarking in a structured, sensible way.

Step-by-step: how to benchmark like a pro:

1. Set the scope

There’s no escaping the fact that salary benchmarking requires a good degree of data analysis – both from within your company and externally. An HR software solution with people analytics functionality will help you take care of analysing your own workforce data; but before you dive in, decide what you’re benchmarking and why.

Ask yourself:

• Are you reviewing the whole company or focusing on key departments?
• Are you comparing base pay only, or total compensation?
• Are you looking at local competitors, national averages, or global benchmarks?

Being clear on your goals will help you gather the right data, and avoid being overwhelmed by irrelevant information.

2. Source reliable market data

There’s no shortage of salary data out there, but quality matters. Depending on your budget and resources, you can draw salary market data from:

• Salary surveys from professional bodies and HR consultancies
• Recruitment agency guides, especially industry-specific ones
• Benchmarking platforms that offer anonymised, aggregated data
• Job boards and platforms like Glassdoor or Payscale (with a word of caution – self-reported data isn’t always the most accurate!).

Don’t assume you know what salaries in your industry sector are. Try to use a mix of reliable sources wherever possible and always check how old your data is. Old data won’t do you any favours in a fast-moving market! The better the quality of your data, the more accurate your benchmarking activities will be.

3. Match roles carefully

Don’t just match salaries by job title – that’s a rookie mistake. Titles can be misleading and vary massively between organisations. This is because the roles themselves may be drastically different (despite similar titles), or require differing skills sets and experiences. Instead, benchmark based on:

• Core responsibilities
• Seniority and decision-making level
• Required skills and experience
• Budget or team management (if applicable)

It’s often helpful to create “job families” or career bands that map your internal roles to the broader market. That way, you’re comparing apples with apples – not with aubergines.

4. Look beyond base salary

Of course, basic pay is important, but it’s only part of the salary benchmarking story. Remuneration is only a small part of what attracts job seekers to roles, so make sure you’re comparing total reward, including:

• Bonuses and commission schemes
• Pension contributions and private healthcare
• Annual leave entitlement
• Flexible or hybrid working policies
• Training budgets and development plans
• Perks like wellbeing programmes, travel allowances, or staff discounts

Remember: even if you’re not the highest payer, a great benefits package – one that employees get real value from – can make you more attractive overall.

5. Analyse the gaps

Now you have your core data, it’s time to crunch the numbers and get benchmarking. This is your chance to identify areas of risk, uncover hidden inequities, and build a fairer, more consistent pay framework. The key issues to look out for are:

• Underpaid roles – Are you below the market rate for critical positions?
• Overpaid roles – Are you spending more than you need to for certain roles?
• Internal inconsistencies – Are people in similar jobs being paid very differently?

Once you’ve conducted your analysis, it’s time to take action!

6. Take action (without overreacting)

Armed with your insights, you can start planning what actions you need to take. You don’t have to fix everything overnight, and it’s best to focus on some quick wins to get started. So, start with the areas that pose the greatest risk to retention or recruitment, and go from there.

You might decide to:

• Adjust pay for specific roles or departments
• Update or introduce pay bands
• Develop clearer progression paths and salary expectations
• Budget for future salary reviews
• Improve benefits where salary adjustments aren’t feasible

7. Communicate clearly

Pay is an incredibly personal subject, and changes to it – or even a perception of unfairness – can seriously impact organisational morale. If your salary benchmarking leads to changes, be ready to communicate them openly and sensitively to those affected.

Explain what benchmarking is, how you approached it, and what you’re doing as a result. Transparency builds trust – and helps your people understand the ‘why’ behind your reward decisions.

It’s worth noting here that your decisions and actions may not be universally popular. However, as long as you’re open and transparent about how and why those decisions were made, you’ll build trust and credibility… even if not everyone agrees with the outcome

Avoiding common benchmarking pitfalls

Even experienced HR teams can fall into these traps:

• Benchmarking everything at once – Start with priority roles or pain points
• Relying on one data source – Use multiple perspectives
• Focusing only on salary – Remember total reward matters
• Failing to revisit – Benchmarking isn’t a one-and-done activity

Think of it as an ongoing process – part of your regular HR rhythm, not a once-a-year scramble.

How often should you conduct salary benchmarking?

As a rule of thumb, benchmarking should ideally be conducted at least annually, but may need to be done more frequently for specific roles or situations. Being proactive gives you a competitive edge, and means you’re not constantly playing catch-up.

Don’t be afraid to revisit if and when:

• You’re hiring for new or hard-to-fill roles
• There’s a spike in turnover
• You’re planning a major restructure or expansion
• Market conditions change significantly

Benchmarking builds confidence – not just numbers

Effective salary benchmarking gives you more than just data. It gives you confidence in your compensation planning, in your reward strategy, your company’s positioning, and your conversations with candidates and employees. It also helps you demonstrate fairness, back up your decisions with evidence, and can create a stronger connection between pay, performance, and value.

So, while it might not be the most thrilling task on your HR agenda, salary benchmarking is one of the smartest. Your people – and your bottom line – will thank you for it.

If you want to learn more about benchmarking, the CIPD offer an excellent factsheet on job evaluation and market pricing, which you can download here.