Compensation benchmarking: a beginner's guide

Compensation benchmarking, also known as salary benchmarking or pay benchmarking is an invaluable tool for companies seeking to pay competitively across borders.

International hiring is easier than ever. Solutions like Employer of Record and Global Payroll simplify what was once a costly and time consuming process. Now, start-ups and SMEs can factor global expansion into their strategy from early on.

While hiring talent in other countries is no longer the undertaking it used to be, developing pay strategies for each of your countries of operation can be challenging.

Each country has its own laws around pay and benefits. Additionally, what constitutes a competitive salary in one location does not necessarily translate to an attractive salary in another location. A web developer in Silicon Valley is not going to be looking for the same salary as a web developer in Delhi.

Employers also need to ensure that they are offering the mandatory benefits of the country of hire, as well as being aware of the local demand for certain benefits over others. For example, in the United States, healthcare is a highly sought after benefit.

This is where compensation benchmarking, or salary benchmarking, comes in.

What is compensation benchmarking?

The short answer is that compensation benchmarking is a service whereby a team of experts benchmark 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 comprehensive report. This report features details and analysis of the economic situation, wage brackets, mandatory and preferred benefits, as well as the relevant legal and ethical considerations.

You might be wondering why compensation benchmarking is so important. After all, isn’t it pretty simple to find out the market average for the roles you’re looking to fill?

Compensation benchmarking goes beyond simply recommending competitive pay. This tool allows businesses to develop long-term remuneration strategies that improve satisfaction, enhance retention, and drive innovation.

How does benchmarking pay benefit businesses?

Attracting the right talent

In competitive talent markets, compensation can be a deciding factor for candidates. According to a recent research report by SHRM, What global workers want and the global worker experience, approximately 90% of workers rated good pay and benefits as highly important to them.

Offering salaries that are too low may deter skilled professionals, while overpaying can strain budgets and create internal inequities. Salary benchmarking allows organisations to offer salaries that meet expectations, without overextending expenditure. This helps employers position themselves as attractive, fair, and credible employers in new regions.

Supporting employee retention and engagement

According to studies by Glassdoor and the Harvard Business Review, higher salaries motivate 45% of employees to work harder. This means greater employee commitment and loyalty, driving retention.

Pay transparency and fairness are increasingly important to employees. As a result, more and more businesses are incorporating transparency into their ethos. A recent KPMG study revealed that over 53% of European companies are considering the level of pay transparency in their organisation.

When workers feel they are being compensated appropriately compared to their peers in the same location and role, they are more likely to feel valued and engaged.

Driving equity

Benchmarking helps reduce pay disparities that could otherwise lead to dissatisfaction, disengagement, or high turnover. This is particularly important for international teams where compensation structures may vary widely.

All countries have gender, race, and disability pay gaps. Organisations can use salary benchmarking to actively work towards closing these pay gaps and promote equity.

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

Ensuring legal and regulatory compliance

Each country has its own employment laws governing minimum wage, overtime, bonuses, benefits, and pay equity. In some jurisdictions, failure to comply can result in fines, reputational damage, or legal disputes.

A compensation benchmarking report highlights mandatory pay elements and benefits, helping businesses remain compliant from day one and avoid costly mistakes.

Enabling scalable global growth

As businesses grow internationally, consistency becomes increasingly difficult to manage. Benchmarking allows companies to create structured salary bands and compensation frameworks that can be applied across regions while still allowing for local variation.

This makes it easier to scale teams, forecast costs, and make informed decisions about where to hire next.

What is typically included in a compensation benchmarking report?

While reports vary by provider, most comprehensive compensation benchmarking studies include salary ranges for specific roles and seniority levels, as well as an analysis of local labour market conditions and cost of living. The report will assess the local statutory benefits and social security requirements, along with common supplementary benefits and allowances. It will address pay frequency and bonus best practices, cultural expectations around compensation, and the legal risks and ethical considerations of the region.

When should businesses use compensation benchmarking?

Compensation benchmarking is particularly valuable when entering a new country or region or hiring your first employee in a foreign market. It can be useful for businesses experiencing high turnover or difficulty hiring locally. It can also be used for reviewing or standardising global compensation policies. If your business is preparing for a mergers, acquisition, or rapid expansion, benchmarking pay allows leaders to streamline their payment strategies promptly and fairly.

Even companies with established international operations benefit from regular benchmarking, as the world of work and the regulations therein are constantly evolving.

Challenges of compensation benchmarking

While highly beneficial, compensation benchmarking does require expertise. Reliable data can be difficult to obtain in certain markets, particularly in emerging economies or niche industries. Additionally, roles may not map neatly across borders due to differences in responsibilities, seniority expectations, or job titles.

This is why many organisations choose to work with experienced global employment partners who understand both the data and the local context.

How Mauve can help

Mauve supports businesses at every stage of their global expansion journey, including compensation benchmarking. With decades of experience operating in over 150 countries, Mauve provides tailored benchmarking insights that reflect real-world market conditions, not just headline salary figures. By combining local expertise with a global perspective, Mauve helps companies design compliant, competitive, and sustainable compensation strategies that attract top talent and support long-term growth. Contact our team today.

Frequently asked questions

Is compensation benchmarking only for large companies?

No. While large multinationals frequently use benchmarking, it is equally valuable for start-ups and SMEs, especially when hiring internationally for the first time.

How often should compensation benchmarking be reviewed?

Ideally, benchmarking should be reviewed annually or whenever there are significant changes in the labour market, inflation, or company growth plans.

Does compensation benchmarking include benefits as well as salary?

Yes. Comprehensive benchmarking covers both salary and benefits, including statutory requirements and commonly expected perks in each location.