Glossary · UK
What is Salary Benchmarking?
Comparing a role's pay against similar roles in the market to set fair, competitive salaries and check for pay gaps.
Full Definition
Salary benchmarking is the process employers use to compare the pay for a role within their organisation against pay for equivalent roles elsewhere in the market, using sources such as industry salary surveys, recruitment agency data, published salary guides and, increasingly, real advertised salary ranges (which employers are being encouraged, and in some sectors required, to disclose more transparently). The aim is to set salaries that are competitive enough to attract and retain staff without significantly overpaying relative to the market, and it is typically done by matching roles based on job title, responsibilities, seniority, sector and geographic location, since pay for a similar-sounding job title can vary substantially between, say, London and other UK regions, or between different industries. Salary benchmarking also plays a role in checking for unfair pay gaps within an organisation -- comparing pay for similar roles held by different groups of employees can help identify and address unexplained gender, ethnicity or other pay disparities, feeding into gender pay gap reporting for larger employers and into broader pay equity reviews. For individual employees, understanding typical market rates for their role and experience level is one of the main tools used when negotiating a starting salary, a pay rise, or a counter-offer, alongside factors such as total reward beyond base salary, including pension contributions, bonuses and benefits.