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Compensation Benchmarking - How to ensure fair and market-oriented compensation.

In a previous blog article (LINK), we introduced you to compensation benchmarking and why it's important in today's dynamic work environment. But how can you apply this knowledge and perform effective compensation benchmarking?


How to get started? The 3 steps of compensation benchmarking


1. Build a compensation database


In order to perform proper compensation benchmarking, you should create a salary database. In this database - or table - , all positions are listed with the salary information for each function. This should also include fringe benefits such as bonuses.

In addition, to properly compare to the current market, just listing the position is not enough. To make better comparisons, you should list activities and responsibilities of each role. In addition, it is important to indicate required qualifications and skills for each position. In this way, the company can obtain a proper basis for comparison for the next phase of the compensation benchmarking process.


2. Analyze employee compensation


Now compare the compensation packages offered to employees with the industry average. External data from various paid or free-of-charge sources can be used for this purpose. On these portals you can see the salary range in a selected region based on the job title. To perform a more detailed analysis, we advise to look at more than just the job title. Important are responsibilities and duties that the person in the position has. For this purpose, it is advisable to write a detailed job description in order to compare it with other positions from other companies. Other important factors that influence compensation include: Industry of the company, location, company size and benefits.


3. Set pay ranges


Let’s define compensation ranges. For this, as described above, salaries must be compared with the market average and compensation levels of the company must be updated and defined. This will ensure that the company pays each employee appropriately and fairly based on their experience and qualifications. The compensation range can be defined as follows:

First, the median market value for each position in the company is determined. Then, the minimum and maximum salary for each position is calculated. Many salaries have a range of +/- 30%.



Why should start ups & scale ups approach Edl Consulting?

Compensation benchmarking is a project, including time for research and customization to your company.


Edl Consulting is the external HR team for small and high-growth companies that share our mission to create a motivating, modern work environment for talents. We are the one-stop HR support and offer operational and strategic support along the entire HR life cycle, including compensation benchmarking.


Edl Consulting can help you to analyze your job roles properly and perform an accurate competitive analysis. Based on the market analysis we help you to make compensation adjustments in your company and define levels and ranges together with you. Analysis and definition is one thing. Even more important is the communication and transparency towards the employees. Together, we support you in the internal communication of compensation adjustments for increasing retention and culture.


Reach out to us now - we look forwards guiding you through the jungle of tools, rules and trust-based company culture!