The importance of benchmarking
This month we’re looking at the importance of benchmarking your salaries to reduce the risk of overpaying staff. More importantly, proper salary benchmarking ensures your best staff are appropriately compensated avoiding losing top talent and reduce high turnover rate. With that in mind, for over fifty years AIM has delivered reliable and up-to-date Australian salary data via our National Salary Survey (NSS).
Why benchmark your salaries?
Labour costs are usually one of, if not, the largest expenses for most organisations. Consequently, being able to keep salaries within budget is crucial to ensure a healthy profit margin, which makes benchmarking salaries a vital organisational process.
In order to effectively benchmark roles, you must have proper job descriptions, match those to external positions (with similar responsibilities, tasks, reporting relationships, qualifications and/or experience) and obtain the market or industry rate to compare and determine whether you are over or underpaying a particular role. The benchmarking process also guides HR’s decisions in not only hiring but also promotions, salary increases and compensation budget planning.
How do you keep your best staff from leaving?
It is no secret that every organisation has staff that outperform the rest. They can be more efficient, more motivated, have more contacts or just bring something better to the table. To keep these people from being part of your staff turnover statistic, you need to provide them with reasons to stay.
It is safe to assume that high performing staff already know what their worth is. With proper data on market salary rates, you can create attractive salary increases or promotions in order to keep your top talent from leaving. This also applies to bringing talented staff into the organisation. Offer above average salaries (and/or bonuses) to captivate new talent, and bring them into the organisation before your competitors do!
For key staff who are at risk of leaving the company, the basic pay increase in line with inflation will no longer do the job but rather a slightly higher increase or other small incentives are recommended to improve retention rate.
How can you reduce salary cost?
The obvious but often overlooked reason to compare external salary rates with your own is to ensure that you are not overpaying your staff. As we’ve stated earlier, labour costs are one of the largest organisational overheads which makes overly inflated salaries unnecessary expenses.
The dangers of overpaying your staff go far beyond your profit margin and into your organisational culture and morale - encouraging mediocrity and discouraging hard work. A healthy amount of internal competition amongst staff (especially in sales divisions) is a good thing for an organisation as it encourages high achievement. But with an over inflated salary, staff will not have that extra motivation to perform at their best becoming lazy and will want to stay in the organisation, continuing to be a pointless cost to the organisation.
The best way to stay up to date with the latest market salary trends and rates is through salary surveys. AIM’s National Salary Survey gives you all the information you need regarding salary packaging along with two complimentary reports: the Staff Retention and Gender Pay Gap reports, which provides additional insights and strategies on how to attract and retain top talent as well as the importance of salary benchmarking to reduce the pay gap. The NSS is now available for pre-order with a special offer for our valued Members of 15% discount when you use the promo code PP15.
Be rewarded for playing your part
Remuneration and compensation consultants, recruitment agencies and industry organisations conduct salary surveys on an annual basis. However, in order to get quality data about salaries, it is vitally important for organisations to contribute their own salary data in order for a robust and dependable report to be produced.
By sharing your organisation’s data, you represent your company/industry/sector in the market data making the information credible to your area. This will result in accurate market rates, ensuring fair and equal pay for all Australians. The National Salary Survey collects both data on salaries and organisational HR policies and benefits. Therefore, by completing the survey, you have an opportunity to look into your own organisation’s policies and benefits in order to evaluate what works or doesn’t.
Furthermore, as a contributor to the NSS you also receive a substantially generous discount of up to 60% RRP when you purchase the NSS. If you have any questions about the NSS or would like to become a contributor, please contact us on 1300 362 631 or firstname.lastname@example.org.