Navigating salary benchmarking for Australian SMEs: Stay ahead of the curve

Salaries are a key factor in a company’s success – getting it right makes attracting, hiring and retaining the right talent much easier. Employment Hero's State of Recruitment Report found that 75% of hiring leaders agree that small businesses struggle to compete for talent with multinational corporations.

For small businesses, salary benchmarking can be a critical tool in for keeping expenses in check while offering competitive salaries that market your business to the relevant talent. Here’s how you can make the most of salary benchmarking to stay ahead of the curve.

What is salary benchmarking?

Salary benchmarking involves comparing your company’s salary offerings against those of other organisations within your industry. This helps ensure that your compensation packages are competitive and aligned with industry standards. With this information, you can make informed decisions about salary adjustments and benefits, which in turn helps in attracting and retaining skilled employees.

In May, our SME Index Report found the median hourly rate for employees in Australian SMEs was $38.67 AUD, reflecting a slight decrease of $0.54 AUD from the previous month. This kind of data is crucial for adjusting salary offers and ensuring that compensation packages remain attractive.

The salary benchmarking process

Step 1: Use salary data

Begin by gathering data from reliable sources – like our salary benchmarking tool. These provide valuable insights into current salary ranges and compensation trends within your sector. This information acts as a benchmark, giving you a snapshot of what other companies are offering their employees.

Once you have collected this data, take the time to analyse it carefully. This step highlights any gaps or areas where you might need to adjust your salary offerings to stay competitive. By staying informed and making data-driven decisions, you can ensure your compensation packages are attractive enough to draw in top talent and keep your current team satisfied.

Step 2: Get across market trends

Market trends are just as crucial when it comes to salary benchmarking. You’ll need to stay updated on emerging trends, like changes in the demand for specific skills or shifts in industry standards. For instance, if there’s a growing need for expertise in a particular technology or a rise in industry certifications, this can influence salary expectations.

Keeping an eye on these trends helps you anticipate what employees might expect in the near future. This forward-looking approach allows you to adjust your compensation packages proactively, rather than reacting to changes after they’ve occurred.

Step 3: Incorporate compensation benchmarking

Compensation benchmarking includes not only salary but also other forms of employee compensation, such as bonuses, benefits and incentives. It involves comparing your overall compensation package with those of similar organisations to ensure you offer a competitive and attractive package. Are your benefits just as competitive as your salaries?

Some examples of compulsory compensation includes:

• Maternity/parental leave
• Personal/sick leave
• Superannuation
• Annual leave

Examples of non-compulsory compensation include:

• Health insurance
• Education programs
• Remote work
• Compressed work weeks
• Childcare benefits
• Wellness classes
• Allowances

Step 4: Use technology where you can

If you’re looking for easier ways to manage the employment cycle, you can leverage technology to streamline your salary benchmarking process. Tools like specialised HR software and compensation analysis platforms can simplify data collection, analysis, and comparison.

These tools provide real-time insights into industry salary standards, helping you to ensure your compensation packages are competitive. By automating these processes, you can save time and resources, allowing you to focus on strategic initiatives that enhance overall employee satisfaction and retention.

Step 5: Make time to review and adjust regularly

Maintaining a competitive salary proposition involves regular salary benchmarking and adjusting your offerings based on market data and employee expectations. Ensure that your salaries are not only competitive but also reflect the value employees bring to the company – it’s a surefire way to boost job satisfaction.

Our Talent Insights Report revealed that a staggering 57% of Australians believe their current pay does not meet rising cost of living pressures. When an employee's salary does not meet their lifestyle and requirements, they will be forced to seek out different employment to climb the ladder.

Aligning benchmarking with your compensation strategy

What is a compensation strategy?

A compensation strategy is how a company chooses to reward its employees. It goes beyond just setting salaries and includes both monetary and non-monetary benefits. This strategy ensures that the way you compensate employees supports your broader objectives.

Crafting an effective compensation strategy involves a few key elements. First, you will need to consider industry standards to stay competitive. Next, employee performance plays a role as rewarding high-performers will boost morale and productivity. Lastly, your company budget will determine what’s feasible. Balancing these factors helps create a compensation package that’s fair, motivating and aligned with your business capabilities.

How do compensation packages align with salary benchmarking?

Compensation packages should be tailored to reflect the insights gained from your salary benchmarking efforts. This means adjusting your base salaries, performance bonuses, and benefits to ensure they’re competitive and in line with, or even exceed, market expectations.

By aligning your compensation packages with the benchmarks you’ve identified, you’ll be in a stronger position to attract and retain top talent. Competitive salaries and appealing benefits make your company more attractive to potential hires and help you keep your current employees happy and motivated.

Benefits of salary benchmarking

It supports employee retention

With unemployment rates at unprecedented lows, many businesses are facing growth challenges due to a shortage of talent. It can be frustrating to deal with this situation – which is why it’s so crucial to retain your current talent. You won’t need to hire more staff if you keep your current high performers.

Salary benchmarking supports employee retention by ensuring that your compensation packages are competitive with industry standards. When employees feel that their salaries are in line with or above market rates, they are more likely to stay with the company. This reduces turnover and helps maintain a stable, experienced workforce.

It ensures quality candidates

If you want to attract top talent, having a competitive salary proposition is key, and salary benchmarking is your best tool for achieving this. By ensuring your salary offerings are in line with industry standards, you make your company stand out to potential hires.

It’s not just about offering a good salary; it's about being seen as a fair and attractive employer in a crowded job market. When your pay packages reflect what others in your industry are offering, you’re more likely to catch the eye of high-quality candidates.

Likewise, salary transparency plays a big role in hooking the interest of prospective candidates. In contrast, top talent will be less likely to apply for positions that are below market, or don’t reveal what their average salary packages are.

Beyond just filling positions, aligning your salaries with market benchmarks helps enhance your company’s overall reputation. When job seekers see that you offer competitive compensation, they perceive your company as a great place to work. This positive perception can make a big difference in attracting and retaining the talent you need, and it strengthens your position in the job market.

It gives you key insights on salary ranges

Getting a grasp on salary ranges means understanding the typical pay bands for different roles in your industry. This involves looking at various factors like job responsibilities, years of experience, and even regional differences that can affect salary levels. By familiarising yourself with these ranges, you can set salaries that are competitive and equitable.

Knowing where your salaries fall within these ranges also helps you make informed decisions about how much to offer employees – and how your workforce will be shaped based on these factors. It ensures that you’re paying appropriately for the roles within your company, which can help you attract and retain the right talent. Essentially, a solid understanding of salary ranges helps you strike the right balance between being competitive in the job market and staying within your budget.

Enhancing recruitment and retention through data-driven insights

Implementing recruitment technology not only aids in efficient salary benchmarking but also in making informed decisions that attract and retain top talent. Our salary benchmarking tool can also offer a comprehensive understanding of salary trends, pay ranges, and candidate expectations.

This data-driven approach ensures SMEs can design appropriate compensation strategies that are fair, competitive, and aligned with their financial capabilities. These insights allow SMEs to improve their overall recruitment process, making it easier to attract qualified candidates and retain valuable employees, which creates a more motivated and productive workforce.

If you’re looking for help with the recruitment journey, SmartMatch can cut down on cost per hire, while managing the onboarding journey.