Attracting and hiring quality talent is one of the biggest challenges facing small businesses today. You can promote a great culture and meaningful work, but if your pay isn’t competitive, candidates may never make it to your door. Market salary data can give you confidence that your compensation supports your hiring goals.

What is Salary Benchmarking?

Salary benchmarking is a data-driven process in which companies compare their internal salaries to similar roles at comparable organizations to understand the market average, allowing them to build compensation structures that support recruitment and retention.

How to Begin Salary Benchmarking

First, determine the roles you want to benchmark and create up-to-date job descriptions for each, including key responsibilities, skills, education, and experience criteria. Next, identify the market criteria to compare against. Industry, geography, and company size all matter. If your hiring pool is local, national data may not be relevant.

Once your criteria are set, compile salary data from sources such as the U.S. Bureau of Labor Statistics (BLS), online salary surveys, job posting websites, and third-party compensation reports. Reference multiple sources to ensure accuracy.

Establishing Pay Ranges and Compensation Strategy

Once you’ve gathered market data, establish internal pay ranges with clear minimums and maximums. Use those ranges to guide your strategy, whether you pay at market or above. Your approach should be driven by business strategy, financial capacity, and performance expectations, with each employee’s placement reflecting their experience and tenure.

What About My Current Staff?

If candidates’ salary expectations consistently exceed what current employees earn, it may signal your pay structure is outdated or the market has shifted. Paying below market damages hiring and retention, so assess where gaps exist and develop a plan, whether immediate or phased, to bring pay in line.

A Special Consideration for Family and Private Businesses

For family and private businesses, salary benchmarking carries an added layer of complexity. Compensation decisions often intersect with family dynamics, particularly when family and non-family employees work side by side. Ensuring pay equity, where salaries reflect role, experience, and market value rather than family status, builds trust and morale. Benchmarking also becomes especially important during succession planning, when key roles may be transitioning to the next generation or outside leadership. Understanding market value helps ensure compensation structures support a smooth transition and remain competitive enough to retain the talent needed to carry the business forward.

Moving Forward

A total compensation strategy grounded in salary benchmarking helps ensure your pay is attractive and in line with market rates, giving you the foundation to hire and retain the talent your business needs to grow.