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How To Create A Salary Benchmarking Process To Attract Top Talents

Salary benchmarking is a common practice among HR professionals and CEOs. By checking and observing typical wages paid on the market, you bring important knowledge into wage negotiations with soon-to-be and existing employees.

Salary is a number very hard to grasp because it has so many influential factors. The most important one is the education of the employee. Additionally, the company’s geographical region, size, and industry are critical factors. Failing to pay attractive salaries could lead to the best talents and experienced long-term employees leaving the company.

Salary benchmarking in recruiting

Salary benchmarking is a critical tool when it comes to hiring and retaining employees. By setting an effective compensation and reward strategy, you will stand out against your competitors when it comes to attracting new talents. If you want to attract the best talents you need to know how much salary they are expecting from you. These expectations are strongly linked with common salaries on the job market.

Salary benchmarking in retaining employees

It will help you reward your existing employees in order to promote a positive employee experience and retain key talent. People you hired years ago could be lacking behind the average job market salary of their position. Even if they are well paid, they might want to renegotiate and may even threaten to leave the company, if they feel paid unfairly. So preparing yourself for negotiations requires knowing which positions have which average salaries.

Key questions in salary benchmarking Your salary benchmarking strategy should answer key questions such as:  

  • Who are your competitors?

  • Do you want to be a market median payer or lead the market?

  • How does base salary fit into your overall reward strategy in relation to bonuses or benefits?

  • Are you looking to drive high performance or is retention your top priority?

Our step-by-step guide to an effective benchmarking process

Salary benchmarking is only as good as the data and the process through which you benchmark.  

Create a salary benchmarking process in 4 steps

  1. Analyzing the job position

Whether you want to fill a new job position or need information for the annual wage negotiation with an existing employee, the first step is to take a closer look at the job in question. What are the requirements to fulfill the tasks of the job? How much experience is required?

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  2. Do your Market Research

Once you have finalized your internal job requirements, you should do your research. Look at the market and chose a relevant data source to compare salaries relevant to your business. You can gain compensation data from a variety of sources including survey data, HR-reported aggregate market data, or even employee-reported data. It is important to critically question which type of data is the best fit for your business and the position you are looking to recruit for. Glassdoor is a great website that can help you make salary comparisons in your area.  

3. Make a Match

In order to find a valid salary benchmark, you need to compare your internal job descriptions with the ones of the market data. Make sure to cover all influential factors at hand, like tasks in the job, geographical area, company size, and industry. We recommend that the internal and external description should be an 80% match (100% is not realistic and not required). Direct competitors should be included in your research. Be aware that job titles are not always reliable in describing a job. There most likely is more than one title to name a certain job (i.e. Marketing Executive/Communications Officer). Thus, always focus on the description to find out what the job on the market really is about.  

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4. Time for Reality Check

Last but not least, take a look at the market pricing and determine whether there is a big variance to your company’s salary for the job. If there is a big variance, you should evaluate the reasons behind it. Are you underpaying or overpaying? Always check your salary strategy with your overall strategy regarding intended growth and values.   


Salary benchmarking ensures that you offer competitive salaries for the best talents and make existing employees feel valued in their everyday work. 

In the new DIMPACT and Mindusurcance of 2022 step-by-step guide, we offer you an overview of a report with typical salary ranges of typical job positions on the market for Germany. You can download the report now from our website.

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