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the benefits of salary benchmarking
Are your senior executives suitably remunerated?
With variations in pay being the potential difference between retaining or losing highly valued directors and keeping shareholders happy, salary benchmarking can be crucial to the success of an organisation. Andrew Linger, Associate Director, Executive Search Setting the right level of senior executive remuneration is critical to business success.
It's why many organisations have remuneration committees in place. But without having access to comparable data from other organisations, it can be difficult to know how to structure and value your own compensation packages.
Salary surveys are a really useful start and are especially useful for roles up to £100k. You can read or request a copy of our global salary survey to make a start. But at more senior levels where there's less comparative data, bespoke salary benchmarking can give you better focus and a more detailed picture.
Bespoke benchmarking will give you a complete breakdown by:
- industry/sector
- compare to specific companies
- business size
- revenue of business
Breaking down the salary package:
The key insight from a benchmarking exercise is a complete breakdown of the salary package, including: basic salary, cash bonus, share bonus, long-term incentive plan (LTIPs) and pension. For listed business this information is of course in the public domain but the data is often without context and it takes a considerable amount of time to draw valid conclusions.
Accounting for sector variation
Pay does often vary depending on sector. For example, in recent research we found two specific businesses from different sectors but with similar revenues paying their CEOs basic salaries of £175k and £288k respectively. Salary benchmarking allows you to make sense of the differences in the context of the whole remuneration package.
For more examples of variations, you can download our full salary benchmarking article.
The difficulty of benchmarking long-term incentives
As LTIPs routinely include share options, and share prices change daily they are the hardest part of the package to quantify. However, the benchmarking approach should include an analysis of the frequency that LTIPs are granted - ensuring variations are accounted for. For help with bespoke benchmarking for your organisation, please contact Andrew Linger, Associate Director, Executive Search on +44 (0)20 7071 7074.