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Compensation benchmarking is a process through which an organization get to know the current status of its compensation in comparison with other companies (preferably similar companies operating in the market) and lay a scope of improvement.
Compensation Benchmarking is a process which enables the organization determine current status of its compensation comparing with other companies of similar business and size. And then take a decision of alignment according the outcome.
Let us start first start with BENCHMARKING, Benchmarking is a highly utilized risk management tool for organizations looking to continuously improve practices and processes. It allows Snap-on to evaluate specific practices and processes related to the company's strategic goals and objectives. When done well, benchmarking evaluates measures and results in many areas, including compensation, performance, product, service and quality. By evaluating and measuring these areas, benchmarking can help organizations cut costs and losses. Benchmarking is not easy, however, and it is never-ending. But most risk managers agree that it is a critical process integral to any entity's success, especially by accurately pinpointing where a company is today, so goals can be set for improvement tomorrow.
Let us now come to COMPENSATION, Compensation is a systematic approach to providing monetary value to employees in exchange for work performed. Compensation may achieve several purposes assisting in recruitment, job performance, and job satisfaction. Compensation is a tool used by management for a variety of purposes to further the existence of the company. Compensation may be adjusted according the business needs, goals, and available resources. Compensation may be used to: recruit and retain qualified employees; increase or maintain morale/satisfaction; reward and encourage peak performance; achieve internal and external equity; reduce turnover and encourage company loyalty; and modify (through negotiations) practices of unions.
COMPENSATION BENCHMARKING is an integral part of Human Resource Management which helps in designing appropriate compensation package, motivating employees and improving organizational effectiveness. Compensation is the remuneration received by an employee in return for his/her contribution to the organization. Compensation Management is an organized practice that involves balancing of work expectation vs. employee output and offers monetary and non-monetary benefits in return to employee’s contribution. The work expectations / standards are redefined every year based on the strategic business objectives of the organization. Compensation benchmarking provides you with important information pertaining to: Recruitment: what does ‘the market’ pay for this kind of job? Retention: are your salaries still market competitive? Review: is your policy/practice still in line with the chosen market level? Performance calibration: is your performance in line with the compensation? Growth: is your compensation structured well enough to stimulate desire of further growth? Structuring: how can your compensation be structured in future to competitively recruit, retain and perform? Positioning: what is your desired market position and how can your current compensation structure help you achieve it? Job: what kind of job / job description entitles what kind of compensation?
