How to avoid common salary benchmarking mistakes

Struggling to attract and retain top talent globally? Unlock data-driven insights and ensure your compensation packages are aligned with local market standards. Contact our team today to explore Mauve's Salary Benchmarking services.

• Using outdated or inaccurate data can result in uncompetitive salary offerings, making it harder to attract and retain talent.
• Ignoring industry, regional pay differences, and relying on a single data source can lead to inaccurate salary benchmarks that do not reflect local economic conditions.
• Failing to consider total compensation, company budget, job responsibilities, and legal/ethical factors (such as minimum wage laws, collective bargaining agreements, and diversity policies) can create financial strain and workplace dissatisfaction.

Expanding into new territories is a huge and exciting step for any business. But making the most of your global expansion starts with building a strong international workforce.

Hiring overseas can mean a totally different approach to hiring in your home country. Hiring, employment, and tax laws all differ greatly between countries. So, it’s important to ensure you’re compliant with all these aspects when onboarding a workforce.

Offering competitive salaries and attractive benefits packages in line with local expectations is a key method of attracting and retaining local talent, as well as staying compliant with local labour laws. This is where salary benchmarking comes in.

What is salary benchmarking?

Salary benchmarking is a service whereby a team of experts benchmarks salaries and benefits packages against local averages, on behalf of a client, in the location where the client wishes to hire staff.

The experts then compile a report. This report features details and analyses the economic situation, wage brackets, and mandatory and preferred benefits. It also includes factors such as the relevant legal and ethical considerations.

For more information on salary benchmarking, read our Utimate guide to salary benchmarking.

What are the benefits of salary benchmarking?

Salary benchmarking is beneficial to both workers and employers. It provides key insights into the economic circumstances of the new country of operation. This service allows business leaders to make informed, strategic decisions around remuneration. Businesses do this to attract employees and maintain a satisfied, productive global workforce.

In an increasingly talent-led market, salary benchmarking supports businesses to offer competitive salaries in line with local averages. These may differ greatly from their home countries, which is what makes salary benchmarking important.

A study by the Harvard Business Review show that higher salaries motivate 45% of employees to work harder. Therefore, both retention and productivity increase. For more on what workers value, visit our article What do employees want from remuneration?

Salary benchmarking not only advocates for competitive pay, but also helps to save employer costs over time. By ensuring your workforce is satisfied and feels valued, you will boost retention levels. In turn, you'll save on the cost of hiring and training new staff – a process estimated to cost between three and four times an employee’s salary.

At its heart, salary benchmarking is about more than cost savings and salary offerings. It’s about providing employers with a comprehensive overview of the social, cultural, and economic factors influencing the market into which they are moving.

Armed with this knowledge, business leaders can make strategic decisions around remuneration. This allows them to build a viable, sustainable, and satisfied overseas workforce.

However, errors in salary benchmarking can lead to issues like overpayment, underpayment, or difficulties in attracting and holding on to your desired talent.

Let’s take a look at some of the most common mistakes to avoid when conducting salary benchmarking.

Common mistakes to avoid in salary benchmarking

Using outdated or inaccurate data

One of the most common mistakes made when undertaking salary benchmarking is relying on out-of-date or inaccurate salary data. As we know, the job market is constantly evolving and salaries fluctuate based on factors such as inflation, industry trends, and location.

Using outdated data can mean that your salary offerings fail to attract and retain talent. It can also put you at a disadvantage to your competitors.

Ignoring industry and regional pay differences

One of the main reasons companies seek to benchmark pay is to assess the regional and industry norms in the country of hire. Pay benchmarks will differ greatly across industries and different countries. Factors such as local cost of living and local industry value will influence salary standards.

Disregarding these key differences and assuming that, for example, tech salaries in Dublin will be much the same as tech salaries in Mumbai will result in companies offering salaries that are inappropriate for the region – either much too high or much too low.

Relying on a single data source

Using multiple data sources is crucial when undertaking salary benchmarking. Using data from only one source can lead to unreliable outcomes, as this does not give a comprehensive overview of the situation in-country. Reliable sources include official government statistics and reports, salary surveys, and industry reports by reputable bodies.

Only focusing on pay

While salary benchmarking naturally should consider all aspects influencing local salary expectations, this practice also needs to take into account total compensation, including bonuses, benefits, stock options, and other perks. When seeking a new role, skilled workers aren’t only looking for attractive monetary compensation offerings.

They are also aware of their benefits entitlements and what a generous overall remuneration package looks like. So, don’t forget to assess the mandatory and preferred benefits in your country of hire.

Failing to align with company budget and strategy

Before you decide on remuneration, you need to be well aware of your company’s financial situation and limitations. Taking into account your organisational goals and strategy is key when deciding on which country to move into, and benchmarking pay for new global hires.

Business leaders should take care to balance competitive salaries with budget limitations and ensure equity across countries.

Not considering role responsibilities and skills

When undertaking salary benchmarking, businesses often make the mistake of matching job titles rather than job responsibilities and required skills. Two positions with the same title may have different expectations and skill requirements, leading to inaccurate benchmarking.

Meticulous analysis of the nitty gritty details is what makes pay benchmarking such a valuable tool.

Failing to consider legal and ethical factors

When conducting salary benchmarking, you need to consider a number of legal and ethical factors. These include:

Minimum wage and cost of living

Salary benchmarking recommends the payment of a living wage. In many places, such as Ireland and Cyprus, the minimum wage offered does not align with the current cost of living.

Collective bargaining agreements (CBAs)

Collective bargaining agreements (CBAs) are contracts between employers and unions representing the employees. CBAs are the result of negotiations between employers and unions. They are legally binding contracts that include details such as the terms and conditions of employment, working conditions, remuneration, hours, leave entitlements, and benefits.

Immigration

When considering an employee’s salary, you need to factor in their immigration status. Some permits, like the EU Blue Card, have salary thresholds that any salary offered will need to meet or exceed.

Diversity, Equity, and Inclusion (DE&I)

Diversity, Equity, and Inclusion (DE&I) policies are vital to any comprehensive salary benchmarking process. These policies promote equity in the workplace and work to combat pay gaps.

When seeking to expand globally and hire an international workforce, it’s important for employers to ensure equity within their organisation. While salaries may be different depending on location, they should ultimately provide workers with a similar standard of living, in their individual locations.

Failing to consider internal equity can create discontent within your company leading to a lack of retention and motivation.

For more information on the legal and ethical considerations in salary benchmarking, download our whitepaper.

Get help with salary benchmarking

Mauve Group’s Salary Benchmarking service is offered by a team with almost 30 years’ experience in the field of global pay and expansion. Our experts boast in-depth knowledge of the international pay landscape in 150+ countries.

By leveraging our services to benchmark pay for your global workforce, you are avoiding the common mistakes that can hinder companies seeking to attract top international talent.

So, no matter where in the world you want to hire talent, we’re ready to provide comprehensive reporting on and analysis of all local factors – from salary expectations and mandatory benefits, to cost of living, and more.

Find out how we can help your organisation to go global. Contact us today.

For more information, download our Salary Benchmarking brochure.

Frequently asked questions

1. Why is salary benchmarking important for global hiring?

Salary benchmarking ensures that businesses offer competitive salaries and benefits aligned with local market standards. This helps attract and retain top talent, stay compliant with local labour laws, and avoid issues like overpaying or underpaying employees, which can impact retention and company costs.

2. What are the biggest mistakes to avoid in salary benchmarking?

Common mistakes include using outdated or inaccurate data, ignoring industry and regional pay differences, relying on a single data source, focusing only on salary rather than total compensation, and failing to consider legal and ethical factors like minimum wage laws, collective bargaining agreements, and DE&I policies.

3. How can businesses ensure accurate salary benchmarking?

Companies should use multiple reliable data sources (such as government reports and salary surveys), consider local economic and industry-specific pay trends, analyse total compensation (including benefits and bonuses), and align salary benchmarks with company budget and legal requirements to ensure compliance and fairness across global locations.