How to Benchmark Salaries at Your Small Company
Learn how to compare compensation data by role, location, experience, and source before making pay decisions.
A structured compensation comparison can help leaders review pay using current data and assumptions suited to each role.
Why compensation benchmarking matters
Compensation may influence whether someone applies, accepts, or stays, but its importance varies by role and person. Use relevant data and employee feedback to review pay alongside workload, manager practices, growth opportunities, and other factors.
Compensation information can help inform hiring decisions. Candidate expectations and response to a posted range vary by role, location, experience, and the recruiting market; use current data rather than assuming a particular outcome.
Where to get compensation data
Public sources and published surveys may provide context, including government labor statistics and role-specific datasets. Coverage, definitions, sample sizes, and update schedules differ; one source may not be sufficient for a particular role or market.
Published compensation surveys and public labor-market sources can provide useful context, but each source has different coverage, timing, and methodology. Document the source and assumptions used for the role and market you are evaluating.
How to run a compensation benchmarking process
Start by defining each role precisely. Job titles vary wildly across companies and do not benchmark reliably. Define the role by its scope of responsibility, seniority level, and required skills. Then search for compensation data using those parameters rather than the title.
Use sources with clear coverage for the role, level, location, and date. Document the compensation philosophy and assumptions used; there is no universal percentile target for every organization or position.
Using the data and communicating it
Compare current pay with relevant reference data and review material differences in context, including role scope, performance, location, and internal consistency. Avoid using a single percentage as an automatic correction threshold.
Explain compensation decisions clearly and consistently. How employees respond depends on the circumstances, the change, and the communication; avoid promising a retention effect.