Compensation Benchmarking

Overview

Compensation benchmarking compares internal pay levels against external market data to assess competitiveness. Uses compa-ratio (actual pay / market midpoint) and percentile positioning. Informs salary band design, pay adjustments, and equity analysis.

When to Use

Trigger conditions:

• Evaluating whether current salaries are competitive with the market
• Designing or updating salary bands and pay structures
• Identifying pay equity gaps across demographics or roles

When NOT to use:

• For individual performance-based pay decisions (use performance management)
• When no market data is available (need at least survey benchmarks)

Algorithm