Benchmarking – The Compensation Building Block

Benchmarking is a skill that every human resource practitioner involved in the compensation process should perform efficiently and correctly. Accurate benchmarking is the foundation of appropriate salary assessments and market comparisons. If one benches internal positions incorrectly it may result in selecting the wrong market salary data and setting an inappropriate salary which in turn creates employee dissatisfaction and a higher turn over rate. Clearly, this is a skill that impacts your organization.

The definition of benchmarking for salary survey purposes is “matching an internal job to an external job of similar content”. The goal is to match each job being performed in your company to the survey benchmark job that most closely resembles the essential functions of that job. Once this is accomplished one can then review the market salary data to determine market rates.

Benchmarking Tips:

  • Always focus on the job functions; never the person, job title or job description. Ask yourself, “If the incumbent left and I needed to hire a new incumbent what would I write in the ad?” And remember that titles differ according to company size and culture. It’s also important to take into account that job descriptions can be out of date or inaccurate.
  • Consider hybrid job functions – In small companies people are often called upon to serve several roles. For example, a person might be asked to be both research associate and glass washer. It is important to review the time spent on each major components of a job (i.e. – the individual spends approximately 40% of their time doing glass wash functions and 60% of their time doing research associate functions).
  • Combine hybrid jobs judiciously. Job descriptors can be blended, but no more than two benchmark descriptions per survey should be combined to represent an incumbent’s job.
  • Stay general. The job descriptions provided by the survey are not intended to be all-encompassing. They are generic descriptions that best describe the essential functions of a job, rather than the application of that job in a specific company.
  • Match closely. The survey benchmark description should be at least 70 percent of an incumbent’s current job responsibilities. If it is less than that it should not be considered a match.
  • Make as many matches as possible. Understand that not every job can be matched. Some are too unique to the company and others, particularly in small companies, may be too hybrid focused.
  • If you aren’t entirely sure what the job entails ask the incumbent. Try not to tell the incumbent why you are asking – there is a natural tendency for incumbents to exaggerate their job functions if they believe the description will determine his/her salary.
  • Resist the urge to inflate.

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1 Comment on "Benchmarking – The Compensation Building Block"

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There was a salary benchmark done at our municipality, all employees were given 50% increase and I was awarded 12% and I was told that it is because I have overlapped to level 2 from 3, hence I was already on level 2 based on the number of years I served the municipality. When salary increases where paid all employees were given a notch progression and I was told I don’t qualify based on the same reason that I have overlapped to level 2. So all this processes meaning salary benchmarking and notch progression I was always at a disadvantage.… Read more »