Setting the right salary is one of the biggest challenges for businesses. Pay too little, and employees might leave for better opportunities. Pay too much, and you could strain your budget unnecessarily. This is where salary benchmarking helps. It ensures that salaries are fair, competitive, and aligned with industry standards. In simple terms, it’s about comparing what companies pay for similar roles so you can make informed compensation decisions.
But how do you benchmark salaries effectively? And where can you find reliable data? That’s exactly what we’ll cover in this guide. You’ll learn what salary benchmarking is, the step-by-step process to do it right, and some free salary benchmarking tools to help you get started. This article will give you the knowledge to build a strong, competitive salary structure.
What Is Salary Benchmarking?
Salary benchmarking is the process of comparing your company’s salaries with market rates to ensure fair and competitive compensation. It helps businesses understand what others in the industry are paying for similar roles, so they can attract and retain top talent. Without salary benchmarking, companies risk either underpaying employees, leading to high turnover, or overpaying, which can put unnecessary strain on budgets. Getting the pay-structure right isn’t just about numbers; it’s about building a motivated and engaged workforce.
When employees know they’re being paid fairly compared to the market, they feel more valued and are less likely to seek opportunities elsewhere. This improves job satisfaction, boosts morale, and strengthens a company’s employer brand. On the other hand, businesses that ignore salary benchmarking may struggle with hiring and retaining skilled professionals, ultimately affecting productivity and growth.
Another key benefit of salary benchmarking is that it brings structure to compensation planning. Instead of making random salary decisions, businesses can set clear pay ranges for different roles and experience levels. This makes it easier to handle promotions, negotiations, and hiring in a way that’s transparent and fair. Simply put, salary benchmarking helps companies stay competitive, manage costs wisely, and create a workplace where employees feel valued and motivated.
How to Benchmark Salaries
Now that we understand what salary benchmarking is, the next step is figuring out how to do it effectively. It’s not just about looking at job listings or asking around, accurate benchmarking requires a structured approach. Follow these seven key steps to ensure your salaries are competitive and fair.
1. Define the Roles You Want to Benchmark
Start by identifying the specific roles you want to compare. Job titles alone can be misleading, what one company calls a “Project Manager” might be a “Program Coordinator” elsewhere. Instead of relying on titles, focus on:
- Core responsibilities
- Required skills and qualifications
- Experience levels
2. Determine Your Benchmarking Market
Salary benchmarks vary based on industry, location, and company size. Decide which market segment makes the most sense for your business. Ask yourself:
- Are we comparing with direct competitors or the broader industry?
- Do we need data from a local, national, or international market?
- Should we compare with companies of a similar size and revenue?
3. Collect Salary Data from Multiple Sources
The more data points you have, the more accurate your benchmarking will be. Use a mix of sources to get a complete picture, such as:
- Industry salary surveys (often from HR associations or consulting firms)
- Government labor statistics (official wage reports by industry and location)
- Job boards & company websites (LinkedIn, Glassdoor, Indeed, etc.)
- Networking and professional groups (HR forums, industry meetups, etc.)
4. Analyze Salary Ranges, Not Just Averages
Looking at an average salary can be helpful, but it doesn’t tell the full story. Instead, break salaries down into ranges:
- Entry-level pay (for beginners with minimal experience)
- Mid-range pay (for employees with solid experience and skills)
- Senior-level pay (for highly skilled or leadership roles)
This allows you to position your salaries strategically, whether matching market rates, paying above average to attract top talent, or balancing compensation with benefits.
5. Factor in Additional Compensation & Benefits
Salary isn’t the only thing employees consider when evaluating a job offer. Other factors like bonuses, incentives, and benefits play a huge role in total compensation. When benchmarking, also compare:
- Performance-based bonuses
- Stock options or profit-sharing
- Retirement plans & insurance
- Remote work & flexible schedules
If you can’t offer the highest salaries, a strong benefits package can still make your company competitive.
6. Adjust Salaries Based on Company Goals & Budget
After gathering data, align salaries with your business strategy. It’s also important to ensure internal pay equity, employees in similar roles should be paid fairly relative to each other. Ask yourself:
- Do we want to attract top talent by paying above market rates?
- Should we offer competitive but sustainable salaries?
- Can we balance compensation with perks like career growth opportunities?
7. Review & Update Salary Benchmarks Regularly
Salary trends change due to market shifts, inflation, and demand for skills. What’s competitive today might not be in a year. To stay ahead:
- Review salary benchmarks at least once a year
- Keep an eye on industry trends & economic changes
- Adjust pay structures as needed to retain and attract talent
Free Salary Benchmarking Tools
Salary benchmarking doesn’t have to be a costly endeavor. While some organizations opt for premium consulting reports, many free resources can help you get a good idea of the market. Here are seven free salary benchmarking tools to help you get started:
1. Glassdoor Salary Insights
Glassdoor is one of the most popular tools for salary data, providing detailed insights into salaries based on employee reports. You can search for specific roles, industries, and locations to understand what others in the same field are earning. Glassdoor compiles data from thousands of job listings and employee submissions, giving you access to salary ranges, bonuses, and even benefits. This data is based on user submissions, which can sometimes lead to variability, it’s still a valuable resource for getting a broad overview of what competitors are paying for similar roles.
2. LinkedIn Salary
LinkedIn Salary is another useful tool for salary benchmarking, leveraging data from its vast network of professionals. The platform allows users to filter data based on job title, location, experience, and industry, giving you a customized salary range for specific roles. What’s particularly helpful about LinkedIn Salary is that it provides insights into total compensation, not just base salary, including bonuses, stock options, and other benefits. LinkedIn Salary also highlights top-paying industries and companies, helping you identify where the highest-paying opportunities are within your field.
3. Indeed Salary Search
Indeed is a job board that aggregates data from job postings and employee reviews, giving you a real-time look at salary trends in your industry. You can easily search for salary averages based on job titles, company names, and geographic locations. One of the great features of Indeed is that it continually updates its data, so you get the most accurate, up-to-date figures for the roles you’re interested in. For businesses, it’s a fast and easy way to ensure that their pay rates align with current market trends.
4. Payscale Salary Reports
Payscale is widely used for salary research and offers both free and paid options for salary data. The free version of Payscale gives you access to median pay information for various roles across industries and locations. It’s a great starting point for employers who want a high-level overview of salary ranges in their area. However, more detailed reports (which include pay by experience level and benefits data) require a paid subscription. Even the free version, though, provides valuable insights and can serve as a helpful resource when considering how to price salaries in your company.
5. U.S. Bureau of Labor Statistics (BLS) (For U.S. Companies)
For U.S.-based businesses, the Bureau of Labor Statistics (BLS) is one of the most reliable and comprehensive sources of official salary data. The BLS offers annual reports on wages by occupation, industry, and region, which are based on thorough research and government-backed surveys. This data is free to access and provides highly accurate, detailed salary information, particularly for more common roles across various sectors. If you’re running a business in the U.S., the BLS is an indispensable tool for understanding industry standards and ensuring your pay rates are competitive.
6. Salary.com Free Tools
Salary.com offers a variety of free tools for businesses looking to benchmark salaries. The platform provides salary range estimates for different roles based on location, industry, and experience. In addition to base salaries, Salary.com also gives insights into additional compensation, such as bonuses and profit-sharing. For businesses that are new to salary benchmarking, Salary.com’s free tools provide an easy-to-understand framework for comparing salaries and ensuring your compensation packages are competitive.
Conclusion
Salary benchmarking is an essential practice for businesses to ensure they offer competitive, fair, and attractive compensation packages. By following the seven steps outlined and leveraging free tools like Glassdoor, LinkedIn, and the U.S. Bureau of Labor Statistics, companies can gather valuable data without costly investments. Regularly reviewing and adjusting salaries based on market trends and company goals helps retain top talent, maintain internal equity, and keep your business competitive. Start benchmarking today to build a strong foundation for both employee satisfaction and business growth.