Compensation Benchmarking
Comparing internal pay levels against external market data by role and level.
Definition
Compensation benchmarking is the process of systematically comparing the pay levels of an organization's roles to external market data, typically sourced from salary surveys conducted by consulting firms like Mercer, Aon, or Willis Towers Watson. Jobs are matched to survey benchmark roles based on scope and complexity, and market percentiles (P25, P50, P75) are used to assess internal competitiveness. The results guide pay structure design, merit budget allocation, and individual salary decisions.
Example
“The annual benchmarking exercise using Mercer's Total Remuneration Survey showed that the company's data engineering roles were positioned below the 25th percentile, requiring immediate salary corrections to remain competitive.”
Synonyms
- pay benchmarking
- market pricing
- salary survey analysis
- remuneration benchmarking