How to Ensure Competitive Compensation: A Salary Benchmarking Guide
For Talent

How to Ensure Competitive Compensation: A Salary Benchmarking Guide

By 
Aushini
|
November 27, 2024
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4
 minute read

How to Ensure Competitive Compensation: A Salary Benchmarking Guide

Global Capability Centers (GCCs) have become vital components of multinational corporations' strategies, handling various functions from IT and software development to customer support and business analytics. As GCCs increasingly take on more complex and value-driven roles, the demand for skilled talent has surged, making competitive compensation a key factor in attracting and retaining the best employees. However, with the talent market becoming more competitive, especially in locations like India, GCCS must ensure that their compensation packages align with market standards. This is where salary benchmarking comes into play.

Salary benchmarking involves comparing your organization's compensation packages with those offered by competitors within the same industry or geographical area. It helps ensure that your GCC remains competitive in the job market, attracting top talent and retaining key employees. This guide provides a comprehensive approach to salary benchmarking tailored specifically for GCCs, with an emphasis on data-driven strategies, industry trends, and best practices

The Critical Role of Salary Benchmarking in GCCs

As the roles handled by GCCs become more strategic and complex, the importance of hiring and retaining top-tier talent cannot be overstated. Salary benchmarking plays a crucial role in this by helping GCCs understand where they stand in the market and what they need to do to attract and keep the best talent.

In recent years, salary increases across various roles within GCCs have been significant, reflecting the growing competition for skilled workers. For example, average salary hikes in certain technical roles have ranged between 8-12% annually. This trend highlights the need for GCCs to continuously benchmark their compensation packages to remain attractive to the talent pool they are targeting

Comprehensive Steps to Effective Salary Benchmarking for GCCs

1. Define the Scope and Objectives

The first step in salary benchmarking is to clearly define the scope and objectives of the exercise. Are you benchmarking salaries across the entire organization, or are you focusing on specific departments or roles? What are the main objectives? Are you looking to retain existing talent, attract new hires, or both?

It's also important to consider the specific roles that are critical to your GCC's success. For example, if your GCC is heavily involved in data science, AI, or machine learning, you may need to prioritize benchmarking for these roles due to their high demand and the corresponding salary increases seen in these areas

2. Identify Relevant Competitors and Market Data

Once the scope and objectives are clear, the next step is to identify the competitors and the relevant market data. For GCCs, this means looking at other GCCs, IT service providers, and even tech startups that compete for the same talent. Identifying the right competitors is crucial as it ensures that the salary data you collect is relevant and accurate.

In addition to identifying competitors, it’s essential to gather reliable salary data. This can be obtained from industry reports, recruitment agencies, and professional networks. For example, you may find that the average salary for a senior software engineer in your region is between INR 18-24 lakhs per annum, which can serve as a benchmark for your own compensation packages.

3. Analyze the Collected Data

After gathering the necessary data, the next step is to analyze it to identify trends, gaps, and patterns. Look for patterns in salary increases, bonuses, and other benefits offered by competitors. This analysis will provide insights into where your organization stands in comparison to the market.

For instance, if you find that mid-level managers in competing GCCs are receiving a 10% salary hike annually, while entry-level positions see only a 5-7% increase, it may indicate that there is a stronger emphasis on rewarding experienced talent in the industry.

4. Align Compensation with Organizational Goals

Salary benchmarking should be closely aligned with your organization's broader goals. For example, if your GCC aims to position itself as a leader in AI and machine learning, it’s crucial to offer competitive salaries in these domains. Aligning your compensation strategy with your organization's objectives ensures that you are investing in areas that will drive long-term success.

GCCs that are focused on innovation might consider offering performance-based bonuses, stock options, or other incentives that align with the company’s growth goals. Offering these types of benefits not only helps in attracting top talent but also in retaining them, as employees feel more connected to the company’s success.

5. Implement the Benchmarking Findings

Once the analysis is complete, it’s time to implement the findings. This could involve adjusting salary bands, introducing new benefits, or restructuring existing compensation packages. It's important to ensure that these changes are communicated effectively within the organization to avoid any confusion or dissatisfaction among employees.

When implementing changes, consider phasing them in over time. For example, introducing a new bonus structure gradually over a 6-12 month period can help manage expectations and allow for proper financial planning.

6. Regularly Monitor and Review

The job market, especially in tech-driven sectors, is dynamic and constantly evolving. This means that salary benchmarking should be an ongoing process rather than a one-time exercise. Regular reviews help ensure that your GCC remains competitive over time and that your compensation packages continue to attract and retain the best talent.

Conducting a benchmarking review at least annually is recommended. This frequency allows you to stay ahead of market trends and make necessary adjustments to your compensation strategy.

Understanding Salary Trends and Market Data in the GCC Ecosystem

1. Sector-Specific Salary Trends

Different sectors within the GCC landscape exhibit varying salary trends. For example, IT and software development centers typically offer higher salaries compared to customer service centers. This is reflective of the higher demand for technical skills and the more complex nature of the work involved.

Salaries in IT-related roles are typically about 20% higher than those in customer service roles within GCCs. For instance, the average annual salary for a software development lead in a GCC might be INR 30 lakhs, compared to INR 25 lakhs for a similar role in customer service.

Understanding these sector-specific trends is crucial when benchmarking salaries, as it ensures that your GCC remains competitive within its specific industry.

2. Geographic Variations in Compensation

Salaries for the same roles can vary significantly based on the location of the GCC. For example, cities like Bangalore, Hyderabad, and Chennai often command higher salaries due to the concentration of tech talent and the higher cost of living in these areas.

In Bangalore, for instance, the average salary for a senior IT manager in a GCC might be around INR 35 lakhs per annum, while in a city like Pune, the same role might command a salary closer to INR 30 lakhs. These geographic variations need to be taken into account when benchmarking salaries to ensure that your GCC offers competitive compensation in its specific location.

3. The Impact of Emerging Technologies on Salaries

As emerging technologies such as AI, blockchain, and IoT gain traction, GCCs that specialize in these areas need to offer premium salaries to attract the right talent. The demand for skills in these areas is high, and so are the salaries.

For example, a data scientist with expertise in AI might command a salary of up to INR 40 lakhs per annum in a top-tier GCC. This reflects the premium placed on these skills and the importance of offering competitive compensation in these high-demand areas.

Best Practices for Effective Salary Benchmarking in GCCs

Develop a Salary Benchmarking Plan

Set clear short- and long-term objectives that align with company goals, define a strict schedule, and allocate an appropriate budget.

Tip:
Align with Strategic Workforce Planning:
Integrate your salary benchmarking plan with your organization's strategic workforce planning initiatives. By forecasting future talent needs and aligning salary benchmarks with these projections, you ensure that your organization remains competitive and attracts the right talent at the right time. Additionally, consider using advanced analytics tools to model various compensation scenarios against business growth trajectories, allowing for more dynamic and responsive salary structures.

2. Create Clear Job Descriptions

Use detailed job descriptions to compare your company’s roles with competitors, improving the accuracy of your salary benchmarking.

Tip:
Leverage Competency Frameworks:
When crafting job descriptions, utilize competency frameworks to define the skills, knowledge, and behaviors required for each role. This will not only make your job descriptions more precise but also help in setting clearer benchmarks against industry standards. Incorporating a competency-based approach ensures that your roles are accurately compared with similar positions in the market, enabling more precise salary benchmarking.

3. Consider Your Data Sources

Utilize diverse and reliable sources, including employer-reported data and crowdsourcing, to gain comprehensive insights.

Tip:
Incorporate Real-Time Market Data:
Beyond traditional salary surveys, incorporate real-time compensation data from sources like HRIS (Human Resource Information System) integrations and compensation analytics platforms. These platforms can provide up-to-the-minute insights into salary trends, allowing you to adjust benchmarks dynamically. Additionally, consider the geographical differentials and cost-of-living adjustments when comparing data from different regions to ensure accuracy in your benchmarking.

4. Collect Salary Data

Gather data from various sources like surveys and reports, and leverage benchmarking software for efficient analysis.

Tip:
Utilize Predictive Analytics:
When aggregating salary data, leverage predictive analytics to forecast future compensation trends. This proactive approach allows your organization to stay ahead of market shifts and adjust salary ranges before they become outdated. Additionally, segment your data by industry, company size, and geography to ensure that your benchmarks are relevant and tailored to your specific business context.

5. Establish a Compensation Strategy

Align compensation with business objectives, balancing competitive salaries with budget constraints for sustainability.

Tip:
Conduct Exit Interviews for Insights:
Use exit interviews to understand why employees leave, especially if there are compensation-related reasons. This feedback can provide direct insights into whether your organization’s salaries are competitive. Ask departing employees about their new offers and what influenced their decision to leave, then use this information to adjust your compensation packages and increase your chances of retaining future talent.

Integrate Total Rewards Philosophy: In developing your compensation strategy, integrate a total rewards philosophy that encompasses not just base salary but also bonuses, benefits, and long-term incentives. This holistic approach ensures that your compensation packages are competitive across all dimensions, which is crucial for attracting and retaining top talent.

6. Set Salary Ranges

Determine salary ranges using market data, considering the required skills, qualifications, and experience for each position.

Tip:
Use a Pay Equity Analysis:
Implement a pay equity analysis to ensure that your salary ranges are not only competitive but also fair across different demographics. This helps in identifying and addressing any potential pay disparities within your organization, which is critical for promoting diversity and inclusion. Additionally, use regression analysis to correlate salary ranges with performance metrics, ensuring that pay scales reflect the value delivered by employees.

7. Document Everything

Create a detailed report on your methodology, data sources, and findings to ensure transparency and secure stakeholder approval.

Tip:
Adopt a Comprehensive Compensation Reporting System:
Utilize a robust compensation management system that allows you to document and track all aspects of your salary benchmarking process. This system should enable easy access to historical data, track changes over time, and provide audit trails for all compensation decisions. Regularly update this documentation and share it with key stakeholders to maintain transparency and ensure that all decisions are data-driven.

Conclusion

Salary benchmarking is essential for GCCs to stay competitive in attracting and retaining top talent. By aligning compensation packages with market standards and organizational goals, GCCs can address talent demands while staying ahead of industry trends like sector-specific salary variations and the rise of emerging technologies.

Implementing best practices, such as leveraging real-time market data and maintaining pay equity, ensures a competitive and fair compensation strategy. With regular reviews and alignment to business objectives, salary benchmarking becomes a dynamic tool that drives talent acquisition, retention, and long-term organizational success.

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