Explore our tech salary benchmarking guide to uncover essential tips for attracting top talent and staying ahead of the competition in the ever-evolving tech industry.
Benchmarking salaries is a crucial task for employers to undertake if they want to remain attractive to the very best candidates.
Under the strains of the cost of living crisis in the UK, candidates across the nation are more focused than ever on fair and attractive compensation, and it is an employer’s duty to ensure that the compensation packages being offered to employees are competitive enough to stand out from rival companies.
Employee retention is hard enough as it is, with the average employee turnover rate for 2024 sitting at just over 35% when a healthy turnover is supposedly at the 10% mark. So, employers need to offer the biggest and best compensation packages if they want to attract and retain their best workers.
With this in mind, we’ve put together a handy guide to ensure you find the perfect balance between profit and satisfaction.
What is salary benchmarking?
Before we delve into the details, it’s important to understand exactly what we mean by salary benchmarking.
Salary benchmarking is the process of gathering and analysing current market data on salaries, so as to gain awareness of industry-standard salaries and apply it to your own salary offers.
Using the findings from benchmarking research to adapt your own company’s compensation packages enables you to remain competitive in an ever-evolving industry.
Salary benchmarking is often referred to as compensation benchmarking, as it not only encompasses the fiduciary salary, but also takes into account company shares, bonus schemes, and other benefits.
Why is salary benchmarking important?
As we know, candidates are under immense financial pressure due to the cost-of-living crisis in the UK, meaning that employees are increasingly interested in receiving fair and competitive compensation. Salary benchmarking is a crucial step that employers must take to ensure they are offering adequate packages to their employees and keeping them satisfied.
Not only does salary benchmarking increase an employer’s chances of maintaining employee satisfaction, but it also plays a huge role in minimising their own losses. Replacing an employee costs an employer over 30% of an employee’s salary, due to the drop in productivity and costs associated with the hiring process.
If salary benchmarking can increase employee retention rates, it can also minimise employer costs.
Why you should salary benchmark
Aside from establishing fair salaries and contributing towards increased employee retention, there are a range of other benefits of salary benchmarking in the tech industry:
1. Attract top talent
The tech sphere is extremely competitive, and the best candidates usually have their options open when it comes to choosing a company to commit to.
Although there are other ways to attract the best candidates, such as offering flexible working arrangements, prioritising diversity, and strengthening your employer brand, offering a competitive compensation package is usually the most effective tactic.
In fact, the best candidates are likely to scroll past your job advert if it doesn’t disclose the salary or if the salary doesn’t meet their expectations.
2. Boost employee satisfaction
Rewarding employees with fair salaries not only leads to increased retention but can also improve their overall job satisfaction in every way.
Studies have shown that employees who feel as though their compensation adequately reflects their efforts and commitment to their job are more likely to feel valued, and – in turn – more likely to enjoy coming to work.
If you undertake salary benchmarking as an employer, your employees are more likely to feel reassured that they are receiving fair compensation, and will therefore be more motivated in their roles.
3. Increases employer awareness
Tech salary benchmarking not only benefits the employee but also ensures that employers know more about industry standards. In turn, this can help minimise instances of overpaying employees and save your company money.
Some top candidates might request salaries beyond your capacity, and if you don’t salary benchmark, you could be led to believe that their requests are fair. However, if you salary benchmark before beginning the hiring process, you will know how to limit your offers fairly to competitor standards, be able to counter offers with authority and avoid overpaying.
How to salary benchmark: best practices
If you have not yet broached the task of benchmarking salaries, it can be hard to know where to start.
With the range of competitor companies across the nation, and the countless data sources online, the benchmarking process is hard to navigate.
That’s why we’ve put together a list of tips, or best practices, to help you get your benchmarking underway.
1. Define your benchmarking purpose
Before beginning the process, it can be useful to establish your reasons for doing so. As benchmarking is a process that requires time, effort, and resources, you might not be able to apply the process to every role in your organisation.
So, start by establishing which roles require benchmarking, and what you want to achieve by the end of it.
2. Limit what you benchmark
Depending on the scale of your company, it might be helpful to stagger your benchmarking process. Begin by benchmarking the roles for which you need data immediately, and only review your benchmarking once or twice a year.
Dedicating unnecessary efforts to your benchmarking can lead to wasted resources.
3. Choose the right competitors
When looking at competitors to benchmark against, make sure you’re only looking at relevant companies.
Make sure that the companies you’re assessing are in your niche, location, and of a similar size to yours.
A great place to start would be to look at companies that you recruit from, or companies that your employees have found employment with after leaving your company.
4. Go beyond salary comparisons
As we’ve mentioned, benchmarking should not be limited to salaries.
Remember to incorporate data pertaining to bonuses, fulfilment schemes, company benefits and more to create a well-rounded compensation package for your employees.
5. Only use reputable sources
These days, almost anyone can publish an article on the internet, so you need to ensure that every source you’re using is reliable.
Consider hiring a salary or compensation consultant expert to aid your salary benchmarking, as they are equipped with the relevant training and industry expertise necessary to streamline your benchmarking and optimise your hiring process.
5 steps to mastering salary benchmarking
Now that you have the top tips, take a look at the steps involved in the tech salary benchmarking process:
- Define your aims and parameters
- Collate the data
- Analyse the data and compare it with your current compensation packages
- Apply your findings and create new salary ranges and benefits packages
- Reevaluate your compensation packages when necessary
It’s as simple as that.
Set your salaries with confidence
In 2024, the tech industry is more competitive than ever, and employers need to offer the very best compensation packages if they want to appeal to the top candidates and retain their best employees.
That’s why we’ve put together this insightful 2024 Tech Salary Guide for you to utilise and refer to as you undertake your own salary benchmarking!
For more industry expertise, visit our website or get in touch with our wonderful team today.
