
Karen Hamilton is pretty sure that the days when employees begin and retire from their careers with the same company are long gone. Especially since salaries exploded as companies had to pay more to attract – and retain – talent, there’s always an organization around the corner willing to pay just a little bit more
That’s why Hamilton, vice president for consulting services at Marsh McLennan Agency, thinks businesses may want to engage in something that’s become all the rage, especially the last few years: Compensation benchmarking.
Compensation benchmarking is the process of comparing an organization’s compensation practices, including salaries, bonuses, benefits, etc., against those of other similar organizations in the same industry or geographical area.
It’s the kind of research Hamilton, based in Louisville, Ky., and other experts say is necessary to attract and retain top talent while also aligning with industry standards and financial capabilities.

“Getting pay right is absolutely a minimum requirement,” said Hamilton, who includes compensation professional among her many certifications.
“If we are not getting the pay right, we are going to lose our employees because there is somebody just right around the corner that’s going to pay a little bit more.”
“The generation of staying with one company and retiring from that same company is long gone, and people will jump ship for a dollar more an hour or $5,000 more a year or whatever that looks like,” she added. “If a company doesn’t know what this job pays, then they may have an issue with employee retention. The economy is stabilizing, the job market is stabilizing, but we still need to be competitive with our pay because people will jump and there’s not as many workers out there.”
Lisa Brown, vice president of client services for Grand Rapids-based HR Collaborative, calls benchmarking compensation a “very important” step.
“It’s vital for organizations to understand the market value of similar positions to those that they employ at their organization,” Brown said. “Knowledge is power, so knowing what the external rate is or the rate the external market is for similar positions can really help navigate the way that they do their business and how they make decisions around pay.”
The Internet has caused a jump in the need for compensation benchmarking. Jobseekers are accessing search sites such as Glassdoor and Indeed and seeing what the jobs they’re interested in are paying, then, in many cases, taking that information back and pointing it out to their employers, questioning whether they’re being fairly compensated.
That’s where companies like Marsh McLennan Agency come in.
“(Businesses) call us and ask, ‘Is this true?’ Is the job actually paying that amount of compensation?” Hamilton said. “As consultants, we do a lot of education on setting up compensation plans, how to price jobs to the market and how to respond to questions that employees may have regarding their compensation. As more and more states adopt pay transparency laws, we’ve seen an increase in questions about how to benchmark positions against the market.”
“We’ve had clients who say, ‘I’m concerned because I need to either publish what we’re paying for this position or the range of pay, and I’m not sure if I’m actually paying what I should be paying,’” she added. “Just having a good compensation structure and knowing how to answer the questions about where a position falls within the organization helps people feel better about their role.”
That kind of benchmarking, Hamilton said, helps give employees an idea of their career path and what the pay structure will look like.
“For example, an employee may be hired as a level one account manager and with a well-developed compensation and career path plan, the employee understands that, after two or three years, here’s the level you could be,” she said. Employees may be inclined to stay at the company longer because the employee understands that there is a chance for them to move up in pay and position. “Benchmarking and career pathing helps us be able to develop that path for our clients,” says Hamilton.
Here’s how it works, according to Hamilton:
• It starts with a good job description, which she calls the “foundation” of the data points.
• Next is a defined market. Some clients want to benchmark on a national average because maybe if they have an open position, they’re going to do a national search.“We want to define the market, whether we’re going to look at something within that client’s location and whether it’s regional, national,” Hamilton said.
• We also ask for their revenue or their asset size so we are comparing similar size organizations.
“I don’t want to benchmark a small company against a very large company,” she said. “We create a total compensation package for that benchmark. We’re really trying to give them a true picture of what the market bears for that position.”
Elizabeth Williams, Principal, HR Solutions for Rehmann, a business consulting and professional advisory firm based in Troy, points out that staying “relevant to the market” is an important piece of the benchmarking puzzle.
Getting the best talent in the job market “is difficult enough,” she said, without being willing to pay market value.
“If you aren’t willing to pay close to market, then you’re at a detriment to finding that talent and then retaining that talent,” Williams said. “If you’re out of touch with what other companies in your industry … you’re left in the dark and you want to tighten up your recruitment and retention strategies.
“Compensation is one piece of that,” Williams added. “It’s not going to solve all your retention and recruitment problems, but it definitely is one of the cogs in the wheel.”
Staying relevant also means doing the benchmarking fairly frequently; Williams recommends doing it “every two, maybe three” years. It doesn’t always have to be a “full-blown” study, but it should happen regularly, she said.

So how do companies get all that information? Some companies simply comb the employment ads on sites like Zip Recruiter and Indeed.com to capture rates of pay.
But agencies like Marsh McLennan Agency and Rehmann subscribe to a database that provides that kind of data for them. It sends out salary surveys to employers and gathers data from the Bureau of Labor Statistics, which are reported by employers.
Algorithms are applied for the positions based on that data.
While benchmarking was done prior to the onset of the pandemic in March 2020, “our world changed after, didn’t it?” Hamilton said.
Suddenly, employees were demanding “different things” such as the flexibility to work from home. Employees and job seekers realized they didn’t necessarily have to be in one location to do the job.
“What’s interesting now is that companies that used to be able to just benchmark in Louisville, for instance, where everybody was,” Hamilton said. “During and after covid, they said, ‘I can live anywhere in the country and still just dial in and be remote.’”
Benchmarking focus has moved from ‘single location’ data to pulling in national data because companies needed to be competitive not just with their local competition, but also regionally because they didn’t know where potential employees were going to come from.
“That has been a huge shift,” Hamilton said. “We also see increases in requests for benchmark data because of the pay transparency laws, employers really want to make sure that they’re being competitive, and if they have to be transparent about their salary, they want to make sure that it’s in a well-thought-out manner and that it’s not just hit or miss. According to Hamilton, while turnover is dropping, employees still have access to data points for their own salaries.
Companies, wishing to retain their top talent, “want to be competitive, and they want to be able to answer questions when the employee says, ‘how come I’m not being paid?’ because they googled comparable salaries,
“I think companies are really understanding now that part of the total package of employee retention and happiness is well-rounded compensation, remote work, career paths, training and development opportunities and giving back to society type things are important,” said Hamilton.
Pending “pay transparency” laws could make discovery of the pay information easier, but there are some cities and states that already require organizations posting job ads to disclose the pay rate for that position.
And many of the job sites, according to Hamilton, now have policies that say if a company doesn’t include a pay range, the site will designate one for them. It’s a way to stem the frustration users feel when they can’t figure out what a position pays.
“Because of the availability of self-reported pay data, pay transparency laws and job boards that require pay rates – benchmarking is not going away,” she said. “It’s becoming more and more important, more and more common.”
Transparency in the process is of paramount importance, Brown said. Being transparent, speaking knowledgeably about the process is “the most beneficial,” she said.
“But don’t over commit and underdeliver, you’re probably doing more harm,” Brown said. “If you say you’re going to share a bunch of information and you refuse to do so, you’re going to lose credibility as opposed to committing to something that may seem a little vague or higher level and then doing more.”
Much has changed since the end of the pandemic. During Covid, salaries exploded as companies tried to hang onto talent, and another phenomenon – the “gig” workforce – took off.
“(Salaries) definitely jumped up during the pandemic and did not go necessarily backwards, but we aren’t facing the same critical jumps (now),” Rehmann’s Williams said. “I guess you’d say you have a job for one (pay) range, but you’re so desperate you’re going to pay $20,000 or $30,000 above what you normally would. That’s not the case so much these days, unless you haven’t checked your market data and it’s completely out of touch.
“If you haven’t done a compensation check in at least two years, you’re already out of touch, pandemic or not,” she added. “You need to keep up at least once a year. Every two years is best practice with the market.”

There was definitely a “shift” for a lot of industries and organizations during Covid, HR Collaborative’s Brown said, which forced a lot of organizations to “right-size or do reduction in force.”
Brown said it hasn’t fully rebounded yet. So how do companies right-size? Brown figures if she knew the definitive answer to that, she’d be a pretty rich woman.
“I wish I had a crystal ball and a magic formula; I’d be very wealthy,” she said. “It’s understanding what your organization can support financially. ‘Do we have the means to be competitive with the external labor market?’ Understanding what your financial position is.
“The second is establishing a compensation philosophy that is understood throughout your organization,” Brown added. “Your philosophy is your mindset. So just like this is how we think about things. It doesn’t mean that we’re a hundred percent living and doing, but that’s our goal is to get there.”
Also different since the pandemic: Different things – more than just money – began taking on more importance for employees.
“The workforce has stabilized, but I’m seeing different benefits come into the workplace,” Marsh McLennan Agency’s Hamilton said. “People are looking for what we need to do to keep people engaged, to keep them mentally and physically focused and able to do their job, because we are so connected that we’re not shutting down at 5 or 6 or even 7 o’clock. We’re working more and more time.”
Tools are available to help companies figure out what some of those additional benefits to offer – above compensation – although some smaller companies may not have as much access.
Benefits broker agencies, Williams pointed out, should have tools, resources, and surveys and reports at their fingertips.
“Some of the smaller ones may not,” she said. “Some of the very large ones actually conduct their own surveys and they have a wealth of information at their fingertips that they can then share with you. It’s obviously going to be pretty comprehensive, but it’s not going to be spot on for every state and every company in the country. But it gets you something of what you need.”
Companies are also trying to come up with benefits such as more paid time off, national employee appreciation days, more and more support for employees volunteering their time in local social efforts to get connected.
“Our younger workforce desires to work for a company that gives back to their communities,” Hamilton said. “That’s something that my generation would’ve never thought about. We would keep volunteer activities outside of work hours. Now you have opportunities to volunteer and give back during the workday. I think that’s huge.”
“I see a huge increase in budgets for professional development, training, ongoing learning and development, opportunities that are going to make people feel like they’re broadening their education while at work,” she added. “Now we’re looking at other benefits to wrap around our employee experience.”