23 Jun 2023
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If compensation is key, how do you unlock insights into market rates?

Christoph Thoma
By Christoph Thoma

Partner, Organisation & Workforce Transformation Leader | EY Switzerland

Building a better working world by helping clients to improve the impact of talent management, leadership, culture, people strategy and organizational transformation for the business.

23 Jun 2023
Related topics Workforce Transformation Realized Life Sciences Financial Services
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Salary reviews beyond simple benchmarks offer valuable insights into the remuneration practice of the market – and your own company.

In brief

Companies ask us the following questions regarding market-competitive salaries:

  • What is the market position in terms of compensation compared to our peers?
  • Is our remuneration strategy effective?
  • How can we overcome challenges in attracting and retaining talents?

Today’s job market is highly competitive, and companies need to offer attractive salaries and benefits to secure and retain the most suitable employees. Candidates expect a package that is in line with industry standards and commensurate with their experience and qualifications. Below-market offers may be perceived as unfair, and top candidates may choose to work for a competitor instead. This is also true of existing employees, who may become dissatisfied and seek employment elsewhere if they feel their compensation is below the market rate. Being known for fair and attractive remuneration can be a powerful recruiting tool, while a positive reputation can attract a steady stream of high-quality candidates.

Salary surveys are a key method to gain valuable and actionable insights into market practices regarding compensation. They can provide information on the market’s current practices and benchmarks. Empowered by this knowledge, companies can identify their current internal and external position with regard to compensation practices. It also helps them to detect potential risks and define any further need for action in upcoming salary rounds.

Companies often ask us the following questions regarding market-competitive salaries:

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  • 1. What is a market-oriented salary for a specific job position?

    The salary for a specific position within a country depends mostly on these four factors:

    • Sector
    • Hierarchical level
    • Job requirements
    • Performance

    A salary survey is normally published by sector and position. The salary figures show the midpoint and average salary of employees within a given job or across the entire organization.

    Another key figure is the salary range, i.e., the range of salaries offered for a particular job across different organization sizes. Besides these figures, information about additional reward elements such as short and long-term incentives as well as distribution of the different salary components can be shown.

  • 2. What is the position of your workforce compared to the market?

    By comparing the salaries of employees in a particular position within an organization with salaries for similar roles in other organizations or industries, important information can be gathered about the companies’ salaries. This analysis can help organizations to determine whether their salaries are competitive in the marketplace and whether they are likely to attract and retain top talent.

    The comparative analysis of salaries involves:

    • Identifying benchmark positions within the organization
    • Determining the salaries for those positions

    Next, the organization can compare its salary ranges to those of other organizations or industries, looking for similarities and differences. For example, they might compare the median or average salaries for a particular role to see their position compared to competitors. They may also consider factors such as location, industry, company size and other benefits and perks offered to employees.

    If the organization finds that its salaries are significantly lower than those of competitors, it may need to adjust its salary ranges to remain competitive. This could involve increasing salaries for certain roles or adjusting the overall salary structure to better align with market rates.

  • 3. How are your salaries distributed within the organization?

    Equipped with more knowledge about salaries in general and about the company’s position compared to the market, it is of great value to further investigate individual employees’ salaries. A line-by-line comparison – involving detailed comparison of two or more employees – reveals more about the internal distribution. The aim is to identify differences and similarities between employees. This approach is commonly used to gain precise information about the employees within an organization.

    Another helpful possibility is to compare internal salary distribution with salaries of external job positions with similar characteristics. The first step in this process is to build clusters of companies from the same region of a similar size. This allows an analysis of your workforce’s salaries with similar workforces’ salaries from other organizations.

Summary

Understanding market salaries and conditions is critical if recruiting teams are to attract and retain top talent and build a positive reputation for their organization.

Salary reviews beyond simple benchmarks offer valuable insights into market remuneration practice — and that of your company. At EY we carefully collect and aggregate data for presentation in an anonymized way, which ensures high quality data insights.

Klingler consultants has been conducting similar salary surveys for many years. Following successful integration of klingler consultants into our reward consulting team in March 2023, EY will carry out these salary surveys in the future.

Acknowledgments

We would like to thank Corinna Ast and Zoe Röösli for their valuable contributions to this article.

About this article

Christoph Thoma
By Christoph Thoma

Partner, Organisation & Workforce Transformation Leader | EY Switzerland

Building a better working world by helping clients to improve the impact of talent management, leadership, culture, people strategy and organizational transformation for the business.

Related topics Workforce Transformation Realized Life Sciences Financial Services
Upvote