In Part 1, we explored why pay benchmarking remains valuable despite its limitations. The more important question, however, is not whether benchmarking works, it is how organisations should use it.
The strongest reward decisions rarely come from a single source of evidence. In my experience they come from combining multiple perspectives to understand what is really happening in both the external labour market and the organisation itself.
Benchmarking should be triangulated
Benchmarking is not a ‘one-size-fits-all’ and requires interpretation underpinned by a combination of evidence and several points of reference such as external salary surveys.
Organisations should combine market data with:
- Specialist market surveys
- Recruitment agency intelligence
- Advertised salaries
- Candidate salary expectations
- Sector-specific remuneration insights
Alongside internal indicators such as:
- Current employee salaries
- Recruitment outcomes
- Offer acceptance rates
- Turnover trends
- Retention concerns
- Internal pay relativities
- Pay compression risks
- Promotion patterns
- Skills premiums
We use these different lenses to create a picture with the understanding that not every source will agree and to understand what the combined evidence saying.
For example, if benchmark data suggests a role is below market and that conclusion is reinforced by recruitment difficulties, unsuccessful offers and increasing turnover, the case for intervention becomes significantly stronger.
Conversely, if benchmarking indicates a market gap but the organisation consistently attracts and retains high-quality talent, the business case for an immediate pay adjustment may be less compelling.
Reward analysis goes far beyond benchmarking, but benchmarking is an integral piece of the puzzle.
Market data must be balanced with internal equity
External competitiveness is only one dimension of an effective pay decision. An organisation can solve a market problem by increasing pay for a particular role, but unintentionally create a different problem internally.
A newly recruited specialist may require a higher salary because of scarce market skills. However, if existing employees performing comparable work remain significantly below that level, the organisation may create pay compression, employee relations concerns or perceptions of unfairness. My advice is that Reward decisions should consider not only the external market but also the impact on the wider pay structure. This is particularly important in organisations with established job evaluation frameworks, structured salary ranges or collective pay arrangements.
Benchmarking becomes more important when markets are volatile
Periods of labour market volatility often lead organisations to question the value of traditional surveys. In reality, volatility often increases the need for reliable external reference points.
At Innecto we supplement benchmarking with more current intelligence from recruitment activity, candidate expectations and advertised salaries which help to identify emerging developments. Together, these sources create a more dynamic view of the labour market and help organisations distinguish between genuine structural change and temporary market noise.
That distinction matters. Not every salary increase observed in the market represents a permanent shift in the value of a role.
Technology will improve benchmarking, not replace judgement
We are seeing a growing availability of real-time salary data, job advertising information and AI-enabled analytics are undoubtedly changing how organisations approach market data. Access to larger datasets and faster insights will improve visibility, but more data does not automatically produce better decisions.
Technology may identify patterns and highlight trends, but it cannot determine:
- Whether a comparator organisation is strategically relevant
- Whether two jobs are genuinely comparable
- Whether paying above market supports business objectives
- Whether an affordability constraint outweighs a market signal
These remain questions of reward strategy and professional judgement.
For me, the future of benchmarking will not evolve to replace traditional survey data with a single alternative source, but organisations will increasingly combine multiple data sources to create richer and more informed market insight.
From benchmarking to market positioning
Perhaps the most useful shift is to stop thinking about benchmarking as a search for the "right salary". A more effective approach is to focus on market positioning.
The key questions become:
- Which labour markets do we compete in?
- Which organisations are genuinely relevant comparators?
- What is our current position against those markets?
- Where are the material gaps?
- Which gaps matter commercially?
- What does our internal pay structure tell us?
- What does our recruitment and retention experience tell us?
- What market position do we want to adopt?
- What can we afford?
- What action, if any, is required?
These questions move the conversation from data collection to strategic decision-making.
So, is pay benchmarking broken?
No, I don’t think so. Pay benchmarking remains fundamentally sound but what needs to evolve is the way organisations use it. Understanding that benchmarking is not a precise calculation that automatically generates a pay recommendation, but one important component within a much broader evidence base.
The most effective reward decisions combine external market data, robust job matching, internal equity, workforce intelligence, business strategy, affordability and professional judgement. At Innecto, we understand these lenses and perspectives, we know the right questions to ask, and we understand the different markets well enough to make defensible, evidence-based and strategically appropriate reward recommendations.
That is not a broken process. It is what good reward practice has always been about.
If you’d like to sense-check how your organisation uses market data, or want support building a more rounded, evidence-based approach to pay decisions, we can help. To start the conversation, get in touch.
