Why pay benchmarking and pay structures are important

When we help clients with pay, we always recommend that introduce a pay framework to give them some structure to make decisions on employees’ pay in a consistent way. This article sheds light on why.

Organisations can be put off by the work involved in this, as a People Management article highlighted last year by looking at the challenges of pay benchmarking and the trends in developing pay structures.

​We find that smaller organisations tend to start with individually arranged pay spot rates and these evolve organically. However, as they develop, they need more structure to help them manage pay fairly. They need take account of market rates and manage fairness between similar roles, particularly where more than one person is doing the same job. 

​Add in the need to recognise performance, and to recruit and retain staff in a competitive employment market and it is easy to get tied up in knots without a pay framework.

​One size does not fit all, and the structure needs to be tailored to the unique culture and strategy of each organisation. It needs not be bureaucratic and does not require a complex job evaluation system to underpin it - the key is for the process to be simple to manage and easy to explain to staff.

​Information on pay is easily accessible online and it is tempting for businesses to rely on this to check the going rates for their staff. Sites like Glassdoor make it easy for staff to arm themselves with information to make a case for a pay rise. For employers, this data helps to build a simplistic picture of pay, but it is risky to rely on this alone. 

​Matching your jobs against a job title or short description can be misleading, producing variable and inconsistent results that are unlikely to provide the level of accuracy needed to make credible pay decisions. 

​We recommend a more rounded approach that takes proper account of the size of the role and the organisation it works in – tailored benchmarking based on robust data is the only reliable way to obtain a true picture. Find out more about our pay benchmarking approach here.

​Do get in touch if you would like us to help give some reassurance to your pay rates and structures.