Salary benchmarking involves five key steps:

Choose Data Sources: Select sources that align with your company's job descriptions, industry, and location, favoring accurate, often paid, aggregated data.

Categorize Positions: Clearly define and group your company's roles based on responsibilities, skills, and experience to ensure meaningful market comparisons.

Apply Compensation Strategy: Align your salary and benefits approach with overall company goals, determining your competitive stance for attracting talent.

Create Salary Ranges: Develop fixed salary ranges, data-driven by benchmarking, to predict costs, reduce inequities, and facilitate clear communication of pay criteria to employees.

The four common methods of job evaluation are:

Ranking Method / Paired Comparison: A qualitative method for small companies, creating a job hierarchy by comparing pairs based on perceived impact, resulting in a forced ranking.

Job Classification: A qualitative method that ranks jobs into pre-determined grade levels based on criteria like responsibility, skill, or seniority, common in many organizations.

Factor Comparison Method: A quantitative method that ranks jobs on various compensable factors (e.g., knowledge, decision-making), assigning points to each factor for direct comparison.

Point Factor Method: A widely used quantitative method assessing jobs(used in Job Evaluation Policy Template) based on required know-how, problem-solving, and accountability, assigning points to factors to determine job score and ranking.

Job evaluation is the systematic process of assessing a job to determine its relative value within a company. For example, a company might use a point-factor method to evaluate roles. They would identify key factors like required skills, experience, education, complexity, and responsibility. Each factor is assigned points based on its level within a specific job. A marketing manager role, requiring advanced strategic thinking and greater responsibility, would accumulate more points than a customer service representative role, thus justifying a higher compensation rate. This ensures that pay reflects the job's contribution and demands, not just the individual performing it.

To write a job evaluation, begin by analyzing and documenting the job content, detailing required knowledge, skills, effort, and how the role fits organizational objectives. Next, assess the job's value by evaluating elements like complexity and contribution to revenue, rather than the employee's qualities. Then, examine the requirements of each job, considering its inherent challenges. Choose a suitable job evaluation method (e.g., job ranking, point factor) based on organizational size, budget, timeline, and data accessibility. Finally, determine the basis for assessing each job role, selecting factors like education or experience that reflect the job's value and align with company preferences.

Salary benchmarking should ideally be conducted at least annually for most companies. This regular review allows companies to remain competitive by aligning compensation with market changes, inflation, and evolving employee expectations. However, businesses experiencing rapid growth, operating in highly competitive industries with high talent demand, or undergoing significant restructuring (like mergers) may need to benchmark more frequently to effectively attract and retain talent.