What is compensation benchmarking?
Compensation survey is the breakdown process of a complete salary package of an individual. It helps the employer to segment every salary component and benefits associated with an employee. It’s completely different from the traditional way of handling a salary, its a detailed process and more focused on every employee benefits and well being. So, overall it’s a much more exact science.
How can we use the compensation benchmarking?
Compensation benchmarking is a tool used by the top management for the different purposes to be competitive in the market. Compensation benefits are adjusted based on company goals, objectives and available resources.
Compensation may be used to:
- Increase employee morale satisfaction
- Reward and encourage peak performance
- Recruit and retain qualified employees
- Reduce turnover and encourage company loyalty
- Modify practices of union
- Achieve internal and external equity
Recruitment and retention of skilled employees are a common focus of many employers. The availability and cost of skilled applicants for vacant positions are determined by the market conditions beyond the control of the employer. In case of Freshers, the employer has the option to establish their compensation benchmark on their own and advertise those salary ranges. Morale and satisfaction are the main components associated with the compensation. Sometimes employer compromise in compensation, in order to save money from the employee turnover that increases the salaries and compensation levels. Compensation is also utilized as a reward for outstanding performance examples of such plan includes- commissions, incentives, stock, profits, sharing, bonuses, interests, gain sharing.
Why is compensation benchmarking so important?
Compensation is a win-win situation for both the employee and employer. It helps both to be competitive in the market and leverage with the benefits associated with it.
Why is compensation benchmarking a benefit to the employer:
- Retracting and retaining top talent
- Staying competitive in the market
- Maximizing plan designs for financial gain
- Using benchmarking, we can grab the attention of top talent
- To get better cost savings in recruitment process
- To gain loyalty of employees
- Easy to recruit and secure top talent
Why is compensation benchmarking a benefit to the employee?
Compensation benefits help the employee to better understand whether it’s the best deal for their qualification, skills, and experience or not and is there any opportunities that can better compensate them. Employees can easily compare the salaries with other competitor companies in the same area on different levels. Employees mainly focus on things like:
- Salary Increases
- Salary Ranges
- Hours expected to work
- Working ambiance/situations
- Work/Life balance
All these details help the employee explore more about the company. It helps the employee to take right decisions by considering these details and look out for the opportunities that best suits them or provide them the space to climb the ladder of their success in the near future. Compensation survey is not the static, it will expire in some months, so companies need to be updated with the compensation survey on a regular basis, that can help them to grow competitively in the market.