The ultimate guide to Salary Benchmarking

• What is Salary Benchmarking? Salary Benchmarking is a service that compares salaries and benefits against local expectations, helping businesses make informed decisions around remuneration when expanding into new markets. This ensures fair pay aligns with economic conditions and considers legal and ethical factors.
• Key benefits for employers and workers: Employers benefit from cost savings, improved retention, and a strong reputation, while employees receive competitive salaries, better job satisfaction, and fair treatment based on local economic conditions and cultural expectations.
• Legal and ethical factors: Salary Benchmarking ensures compliance with local employment and tax laws, collective bargaining agreements, and more. It also takes into consideration Diversity, Equity, and Inclusion (DE&I) policies to address pay gaps and promote equity in the workplace.

It’s no secret that the cost of living is rising globally – growing by 7.4% in 2023 alone. In the current climate, workers are increasingly likely to prioritise attractive compensation over all other factors.

This means it’s more important than ever for companies to offer competitive salaries, taking into consideration the key factors that affect their workers. Enter: Salary Benchmarking, a service offered by global employment solution providers to support businesses with making smart decisions around remuneration when employing in new markets.

As global mobility becomes the way of the future, Salary Benchmarking is increasing in popularity. In fact, 54% of Harvard Business Review survey respondents say they use the service when hiring employees in new locations.

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, featuring details and analysis of the economic situation, wage brackets, mandatory and preferred benefits, as well as the relevant legal and ethical considerations.

What are the benefits of Salary Benchmarking?

Salary Benchmarking is a crucial element of global expansion. It benefits both workers and employers and provides key insights into the economic landscape of the new location. When approaching today’s dynamic global labour market, business leaders must make informed, strategic decisions around remuneration in order to secure top talent.

Ensuring that you are offering competitive salaries that align with local norms is a way to ensure your company’s competitive edge in an increasingly talent-led market.

How Salary Benchmarking benefits workers

Competitive salaries

Salary Benchmarking allows employers to ensure that workers are offered competitive salaries and benefits packages. It is useful because the remuneration packages an employer may offer in their home country may not be appropriate for the new market. Salary benchmarking ensures that workers are not lowballed, and are offered attractive packages, making them feel appreciated.

Role satisfaction

Studies by Glassdoor and the Harvard Business Review show that higher salaries motivate 45% of employees to work harder. However, along with this, workers also value flexibility, work-life balance, feeling valued, and a sense of belonging.

Considerations like local and cultural expectations regarding these factors are also assessed in Salary Benchmarking reports. This gives employers the best insight into ensuring employee satisfaction in the new region.

For more on what workers value, visit our article What do employees want from remuneration?

How Salary Benchmarking benefits employers

Cost savings

Paying the initial cost of a Salary Benchmarking service provides a significant return on investment. This can be seen in retention boosting and reputational enhancement.

Recent figures from The Harvard Business Review show that a 6% salary increase leads to a 16% rise in retention the following year. Boosting retention is not only practical; it’s a cost saving measure.

Investing in your employees means they are more likely to remain loyal to your company. This, in turn, saves you the cost of hiring and training new staff – a process estimated to cost an average three to four times the employee’s salary.

Reputation building

When you offer competitive salaries that meet local expectations and foster a loyal, satisfied workforce, the decision will translate into a strong reputation. Building a reputation as a supportive employer will mean you continue to attract top talent. It will also show prospective customers that you are a trustworthy partner for their needs.

More and more businesses are turning to Salary Benchmarking to help them make smart decisions when moving into new territories. This is because Salary Benchmarking is about more than approximating the appropriate salary to offer a foreign worker.

It’s also about providing a clear overview of the economic, social, and political landscape in which the worker is operating. As a result, there are a number of legal and ethical considerations to be taken into account.

What are the legal and ethical considerations?

Legal considerations

Minimum wage and cost of living

Salary Benchmarking recommends the payment of a living wage. It’s important to note, that often, this will not match the country’s minimum wage. This is a crucial point – as in many places, the minimum wage offered does not align with the current cost of living.

For example, in Cyprus, the minimum wage is €1,000 per month, while the average rent in cities such as Paralimni is €1,200 per month. In the United States, a 2023 study by Massachusetts Institute of Technology shows that in no state does the minimum wage match the cost of living.

It is vital that employers are aware of these factors when deciding on salaries.

Collective bargaining agreements (CBAs)

Collective bargaining agreements (CBAs) are contracts between employers and unions representing the employees. These pose another key legal consideration in Salary Benchmarking.

CBAs are borne out of negotiations between employers and unions. They include details such as:

• the terms and conditions of employment;
• working conditions;
• remuneration;
• hours;
• leave entitlements; and
• benefits.

CBAs are legally binding contracts between organisations and their employees. Therefore, they need to be taken into account in salary benchmarking as the details contained in CBAs cannot be deviated from.

CBAs are beneficial to both employer and worker, as they streamline and simplify labour relations and promote equity and stability. In doing so, they also boost employee morale and, therefore, retention.

Ethical considerations

Immigration

An employee’s immigration status must be considered when their salary is being benchmarked. Some permits, like the EU Blue Card, have salary thresholds. These can differ between locations, so it’s important to ensure the salary you’re offering exceeds the required threshold.

DE&I

Diversity, Equity, and Inclusion (DE&I) policies are at the heart of any comprehensive salary benchmarking process. These policies promote equity in the workplace, and work to combat things like the gender pay gap, the race pay gap, and the disability pay gap.

Staying abreast of all local DE&I policies, as well as taking into account your own internal organisational DE&I programmes and policies is key to ensuring equity within your company, no matter where in the world your workers are.

For more information on the legal and ethical considerations in Salary Benchmarking, download our whitepaper.

Why Salary Benchmarking is for you

Salary Benchmarking is an invaluable tool for companies seeking to thrive in the global marketplace.

In short, Salary Benchmarking allows you to:

Strategise

Use the latest salary data to make informed decisions, meeting your organisation’s goals while aligning with your in-house ethos.

Attract the cream of the crop

Offering attractive and competitive remuneration packages will ensure you stand out from your competitors and secure top talent.

Boost retention

Ensure your workers are valued and satisfied in their roles by recognising their contributions and hard work.

How Mauve can help

With almost 30 years of experience helping companies of all sizes to go global, our experts are armed with in-depth knowledge of 150+ countries. 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, to 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.