Culture & Engagement

Benchmarking salary: How do you compare?

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Updated 7/6/2023


Salary benchmarking is important for both employers and employees. It helps you offer a fair and competitive salary, which is vital for retaining and attracting top talent. But what exactly is salary benchmarking? Why is it important? And how do you even start to benchmark a salary?

In our guide, we’ll explain what salary benchmarking is, exactly why it’s important and how to properly conduct salary benchmarking in your company, or as an employee. Don’t worry though. Read on to find out more.

What is salary benchmarking?

Salary benchmarking, also known as compensation benchmarking, is the process of collating external information on pay packages outside of your organisation. This data is then used to compare and understand the current job markets, and put in place competitive salaries for specific roles in the organisation.

With regards to HR and recruitment, benchmarking salary is crucial for comparing the current packages with competitors, so they’re able to offer the best salaries possible. In turn, this process will help keep drive employee engagement, prevent the loss of employees to competitors and get a general overview of their competitive edge in their industry.

Why is salary benchmarking important?

It’s important for companies to use and understand salary benchmarking as a respectable paycheck is one of the key parts of an employee doing and enjoying their job. If the salary isn’t competitive, you may find that employees look elsewhere, or to competitors, for the same job with better pay.

This in turn increases your employee turnover and may lead to other employees following suit. There are also a few other key benefits to salary benchmarking, including:

    • Overall improved job satisfaction
    • Determining hiring costs and reducing them where possible 
    • Compliance with salary regulations such as minimum wage 

Overall benchmarking salaries is vitally important for attracting key talent, retaining employees and keeping stakeholders up-to-date on industry trends.

How does salary benchmarking work?

To start effectively benchmarking salaries, you need a collection of salary data including the list of roles you need to research. Information such as this is readily available publicly in annual reports in your industry, however, gathering and organising this data is a lot of work. 

Third-party tools and services are the most common way to benchmark salaries, saving a lot of time and effort, and being thoroughly reliable as they’re an unbiased party. Although there are paid services out there, free tools are available.

  • Salary benchmarking tools: How to find out the average salary for any job role

By far, the easiest way to quickly check the average salary for any job role is to use a crowdsourced benchmarking tool. These tools are normally run by online job boards, which gather salaries from multiple open or historic vacancies, to provide you with an average salary for any particular role.

There are many of these tools available, but here are some that we have found to be the most helpful, and the easiest to use.

    • Glassdoor

Glassdoor is probably the best free service for checking salary. Why? Because it doesn’t rely mostly on advertised salaries. Glassdoor’s salary checker focuses more on crowdsourced data from employees who are actually working the jobs right now. They anonymously report their role, location and salary, which is factored into Glassdoor’s calculations.

    • Indeed

Indeed lets you search and compare more than 200 million salaries for free. You can search by job role, or even by the specific company – which might help you do direct competitor research.

    • Reed

One of the good things about Reed’s average salary checker is it lets you search by skill or industry. This is helpful because job roles are sometimes difficult to define. If you know what skills you are hiring for, then you can simply type this in, and select one of the job roles from the list of suggestions.

There are many more tools for benchmarking salaries which you can find online. The above are just three of our favourites and the most well-known.

Find out more on how to manually benchmark salaries

If you want to dig even deeper, the CIPD (the professional body for HR and people development) provides an in-depth guide to job evaluation and market pricing with many further sources of pay data, how to interpret the data and methods to set fair and competitive pay. Read this if you want to gain more in-depth knowledge on how salary benchmarking can help your business.

What is the average salary in the UK?

According to the Office for National Statistics (ONS), in their report ‘Employee earning in the UK: 2021’ the median average annual pay for full-time employees was £31,285 for the tax year ending 5 April 2021, down 0.6% on the previous year.

The ONS report details how the average annual pay in the UK was greatly affected by the coronavirus pandemic during the tax year ending in April 2021, so it’s important to keep this in mind.

Looking at the average UK salary isn’t the best indicator for setting salaries for specific roles, but it can really help to have a good overview and know what information is out there. Benchmarking salaries in your industry is the best way to get an indicator of what pay packages you should be setting.

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Jake Fields
By Jake Fields New Business Sales Representative

Jake Fields is a New Business Sales Representative at Access PeopleHR. With a diverse background spanning customer service, training, and sales, he is a seasoned professional in all things HR software. Jake's global training experience has cultivated strong client relationships across a range of industries. A true people person at heart, his mission is to provide tailored solutions and support individuals throughout their HR journey.

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