You may have heard of market benchmarking in the context of remuneration planning or enterprise agreement negotiations, but what is it and what are the benefits?
Karen Nelson, Ai Group Workplace Relations Practice Leader for Western Australia, says market benchmarking can be the key to finding competitive advantage and attracting and retaining employees.
“Market benchmarking involves analysis of data to identify the remuneration and employment conditions being offered to employees in the market for particular roles, locations or industries,” Ms Nelson said.
“This analysis can involve extracting the remuneration and employment conditions provided by enterprise agreements applicable to an employer’s competitors. Other relevant data may include economic figures, average annualised wage increases by industry and location, salary reporting and data extracted from job advertisements.”
An employer can use the analysis of this data to strike a balance between offering a competitive set of employment conditions and managing wage costs. Getting the balance right can have a significant positive impact on a business’ competitive advantage and provide a strong foundation when preparing for any type of wage or salary negotiation, annual wage increases, enterprise bargaining or tendering.
“We find that employers often come to us for market benchmarking which focuses on the remuneration and conditions being offered by the employer’s competitors at times like this, when unemployment is low and the labour market is tight,” Ms Nelson said.
“Employers can also use analysis of remuneration structures to identify potential wage savings or cost efficiencies. For instance, analysing rostering practices and undertaking modelling to maximise productivity can reduce the more expensive penalties and overtime rates being triggered by the roster. These cost savings can be redistributed, for example to wage increases, which can help improve employee retention or improve the sustainability of operations in the long term.”
Wage modelling, in particular, can give employers the insight they need to better manage their workforces, and operations generally.
Market benchmarking doesn’t need to be limited to monetary benefits.
“Through market benchmarking, employers can identify employee benefits which do not require any significant upfront costs,” Ms Nelson said.
“For example, we are seeing a lot more interest from employers in non-monetary benefits such as initiatives to improve work/life balance and the health and wellbeing of employees.”
Amber Roncoroni, Ai Group Workplace Lawyers’ Senior Adviser – Workplace Relations Consulting, said Ai Group is uniquely positioned to provide detailed and accurate market benchmarking given its economics research area.
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