What is global salary benchmarking?

With so many businesses going global—or, at the very least, beginning to recruit talent globally—it’s becoming more important for leadership to have their finger on the pulse of the global workforce and salary trends. This is only made more crucial by the wide and continued proliferation of remote work as a legitimate and useful way of working.

As industries, cultures, and trends change, a business that isn’t paying attention can quickly find itself losing talent, money, and reputation. To avoid this, it’s necessary to look at global salary benchmarking data and set a strategy for how the business will approach questions of hiring and salary going forward.

Understanding global salary benchmarking

Average salaries vary greatly around the world, as do benefits, perks, and legally required concessions for employees. Even within states or regions, it’s not unusual to find drastic differences in the cost of living and local regulations. This raises a crucial question: How do companies determine a fair rate of pay for workers coming from different areas, backgrounds, and jurisdictions?]

Global salary benchmarking is the process of gathering industry-relevant data about how employees of similar skill levels, responsibilities, and tenures are paid in various locations across the globe. Gathering cost-of-living data is also part of the process so that adjustments can be made to ensure that employees in different parts of the world can achieve a similar quality of life from the adjusted salary.

This gives leadership an idea of how much an employee will expect to make in their role depending on where they are based, and it allows them to ensure their salary stays fair and competitive. Global salary benchmarking can also be used to devise and standardize an appropriate strategy for career growth plans for global teams.

Benefits of global salary benchmarking

Setting appropriate salary benchmarks for a global team comes with numerous benefits. The first is better talent acquisition. If a business offers a flat salary and benefits package—regardless of an employee’s location—they may unintentionally disregard valuable talent in areas where the role is more highly valued or better compensated. Therefore, setting the role’s salary to meet international salary benchmarks opens up the job to a wider field of candidates, allowing a business to select from a more skilled talent pool.

A clearly defined and communicated international salary benchmark also helps prevent resentment among employees and distrust within teams. Large disparities in salaries among people within the same organization—especially on the same team—may cause tension and raise questions if the company doesn’t have a transparent global salary policy. While some difference in salary between locations is to be expected, one employee making less than other employees may eventually wonder why their time isn’t worth the same as that of their peers’.

Finally, a business can increase overall job satisfaction and stay within budget by adopting a unified strategy for global salary benchmarking. Having a system in place to easily determine how much an employee can be paid based on location makes it easier for HR departments to clearly communicate salary expectations and reduce turnover rates. Employees will appreciate having a coherent, cogent explanation of how their salary was determined and how it compares to their peers. They’ll also be more likely to dedicate themselves to a company that they feel treats them fairly and compensates them according to market value.

Implementing strategies to set global salary benchmarks

One of the foremost concerns any business has when using global benchmarking data to come up with compensation strategies is how to remain compliant with each jurisdiction’s protocols. At the end of the day, a business doesn’t truly have the final say on whether its compensation package is acceptable.

Instead, that is determined by the country and locality where the employee is based. Unions may also impact salary requirements. When developing a benchmark, a company needs to have methods in place to evaluate legal requirements and make them work with the desired overall compensation package.

It’s also important to never view the individual employee as simply the remuneration of a salary. Businesses need to consider the total compensation package they offer, including benefits, stipends, and perks. This means balancing their global salary benchmarking around even more pieces of data.

Some countries will legally require a 13th-month salary, while others may have stipulations about how and when bonuses are distributed. Every business needs to decide for itself which parts of its total compensation package will remain local, and which parts will be implemented company-wide. The business will also need to determine if it’s fair to offer certain benefits in locations and situations specific to some employees but not others.