Wages and Benchmarking
The following factors can influence how much a business is willing to pay an employee:
- Ability to Pay
- Supply and Demand
- Prevailing Market Rates
- Cost of Living
- Bargaining of Trade Unions
- Government Regulations
- Cost of Training.
Naturally, the wage or salary paid to an employee is an important factor in their relationship with management. For many employees, their income is one of the largest factors in determining their living condition and quality of life, though this relationship becomes less important said income passes a certain level.
Likewise, the amount paid to an employee by management will influence the quality and quantity of work expected, as to increase pay without seeing an increase in productivity is to reduce profits for the business. Luckily, better and more competitive salaries often result in better employee engagement.
These considerations, and many others, make wage and salary negotiations an integral part of hiring new staff and keeping existing employees.
Finding a balance between these factors can be difficult, but it can be made easier with salary benchmarking.
Salary benchmarking is a process by which an employer can seek to match internal job descriptions with a fair remuneration. The inclusion of salary benchmarking in an HR strategy can help to increase employee engagement as well as to help the business retain and attract top talent.
Salary benchmarking helps you determine if the wage you are offering is fair and meets legislative requirements.
As a business, you might decide to pay wages at the maximum or mid-point or minimum of what’s common in the job market. By benchmarking wages for each role within your business, you can be certain you are meeting your organisational goals (and legal requirements).
The Salary Benchmarking Process
The first step in this process is defining job descriptions for the positions within the business.
Once the business has completed this step, they can seek out and match these descriptions with roles defined within established salary surveys. This can be accomplished through the use of job titles, position descriptions, or both. When searching for market data to benchmark these roles against, you can source data from existing data sources like surveys, conduct surveys of your own, and / or consult a human resource manager to assist you in determining market rate.
Once you know the average salary for positions similar to those you are benchmarking, you will be better equipped to make informed decisions when negotiating wages and salaries with new and existing staff.
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