Definition
The process of comparing an organisation's pay rates and reward packages against external market data to ensure compensation is competitive, fair, and aligned with the organisation's reward strategy.
UK Context
UK salary benchmarking should consider regional pay variations, sector norms, and the impact of the National Living Wage and Real Living Wage. The ONS Annual Survey of Hours and Earnings (ASHE) provides comprehensive public-sector data. Employers with 250+ staff should consider how benchmarking outcomes affect their gender pay gap report. The CIPD publishes annual reward survey data specific to the UK market.
Best Practices
- Benchmark roles based on job content and responsibilities, not just job titles which vary widely
- Use multiple data sources to triangulate findings and avoid relying on a single survey
- Benchmark against relevant comparators by sector, size, location, and ownership structure
- Review benchmarking data at least annually to keep pace with market movements
- Use benchmarking to inform a clear pay structure with defined ranges, not to set individual salaries in isolation
Frequently Asked Questions
How often should salary benchmarking be done?
Most organisations conduct a comprehensive benchmarking exercise annually, timed to inform the annual pay review cycle. Key roles or sectors experiencing rapid market movement may need more frequent reviews. At a minimum, benchmarking should be refreshed whenever there are significant changes to the external market or internal strategy.
What data sources are available for UK salary benchmarking?
Key sources include professional survey providers (Willis Towers Watson, Mercer, Korn Ferry), the ONS Annual Survey of Hours and Earnings, CIPD reward surveys, XpertHR salary surveys, industry body data, and recruitment agency guides. Free sources include ONS data and job board advertised salary ranges.
Should we benchmark to median, upper quartile, or another point?
Your target market position depends on your reward strategy. Median is a common target for most roles. Upper quartile may be appropriate for critical or hard-to-fill roles. Some organisations use a differentiated approach, paying above median for strategic roles and at or below median for others.