Salary benchmarking allows companies to establish whether their senior executives’ remuneration packages are in line with the rest of the market. Here, we explore it in more detail.
In some cases, they don’t want to risk losing their top executives to offers of better pay packages from competitors. In others, they want to be able to prove to their shareholders in black and white that their senior staff provide value for money. Either way, it can be vitally important to the success of an organisation.
But getting this information can be difficult. At the most senior level, where there are simply fewer roles to compare, it is not widely available.
Salary benchmarking gives a complete breakdown of the compensation package allowing companies to compare salary and benefits available within specific sectors and named companies. So, overall it is a much more exact science than, say, a salary survey.
For listed businesses, the majority of this information is available publicly within annual company reports. But organisations will typically not have the required resources to analyse the data in the most useful way. Enlisting a third party, such as Robert Walters, to carry out this work can therefore save a lot of time and effort.
Typically, it will provide a list by company size, sector and revenue. It will also detail the package earned in terms of the value of the basic salary, cash bonus, share bonus, long term incentive plan (LTIPs) and pension of the position in question (be it CEO, COO, CFO or FD).
Pay varies widely depending by sector. In one of our recent reports, two specific businesses from within the scientific & instruments and manufacturing industries, with similar revenues, paid their CEOs basic salaries of £288,000 and £175,000 respectively. Salary benchmarking allows organisations to get an idea of these differences.
Salary benchmarking allows companies to establish whether their senior executives’ remuneration packages are in line with the rest of the market.
The value of different components of the package can differ greatly. Salary benchmarking considers all aspects of remuneration to ensure it gives an accurate reflection of the take-home package.
Salary benchmarking allows companies to make comparisons of these figures between a large number of other businesses. As part of the analysis, the research can determine the overall mean, as well as lower and upper quartiles, of the value of each component of directors’ overall compensation packages. These gives a clear indication of how their directors’ pay compares with the market.
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