What Is Compensation Benchmarking Software?

Nicholas J Price
5 min read
Executive compensation is quickly climbing the ranks as one of the most hotly debated topics in the marketplace. Listed companies are facing scrutiny over how much they pay their executives and whether they're getting enough value for talent and expertise. In order for companies to justify executive compensation packages, they need to know what similar companies are paying for the same positions.

This is a challenging task, especially when companies don't have good information about the compensation practices from within their countries and among their competitors.

If you're interested in attracting and retaining the top talent in your industry, you have to know what other companies of similar sizes and revenues are offering. This information can be difficult to get without compensation benchmarking software. Gaining access to the right information helps your company get and keep quality expertise, which keeps shareholders happy and leads to the success of your company.

Why Is Tracking Compensation So Important?

There are two major reasons for tracking executive compensation. When you have a current or potential opening, you'll want to present an offer that's so attractive, they won't consider turning it down. If you don't pay your current executives enough compared with your competitors, you stand to lose the expertise that you have, as well as all that you've invested in them.

Your shareholders are demanding good value within your leadership for their investments. Compensation benchmarking software gives them transparency of data, which will quell their anxieties and affirm that the company's leadership is in the best hands. When you have accurate data about compensation averages and a good understanding of pay equity and pay for performance, it satisfies shareholders' need to know.

Compensation Benchmarking Software Is a Valuable Tool for Remuneration Committees

Listed companies establish remuneration committees for exactly the purpose of figuring out what to pay their executives in salaries, shares, benefits and other perks that keep them happy and demonstrates goodwill with shareholders. Without knowing what competitors are paying, remuneration committees certainly have a disadvantage.

Some companies resort to using salary surveys. Such surveys tend to be better tools for evaluating junior-level managers, which are common roles in companies. There are fewer roles for remuneration companies to compare at the senior executive level, which makes using surveys a less accurate way of obtaining data about salaries at this level. Compensation benchmarking software provides a more focused and detailed process of gathering marketplace information than companies can get using traditional salary surveys.

There can be huge variations in compensation and benefits at the senior executive level, and making the wrong decisions can put your company at a strong disadvantage.

What Is Compensation Benchmarking?

Compensation benchmarking takes the guesswork out of setting competitive executive compensation because it offers a more exact science on how to gather data around compensation and benefits packages.

Compensation benchmarking software allows companies to compare the salary and benefits that are available within certain industries and named companies, including a complete breakdown of remuneration packages. Being able to obtain good data will help your board to overcome the numerous obstacles that are in the way in setting compensation so you can make the best possible offers for talent and get great employees for your money.

How Is It Possible to Get Accurate Information About Compensation in an Expedient Manner?

Getting executive compensation data provides an interesting challenge. Listed companies have to provide it in their annual company reports, which are available as public information. However, most companies don't have the staff or budgets to invest the vast amount of time that it would take to sift through large volumes of reports. To attempt such a task on your own will likely yield a lot of wasted time and resources without getting any meaningful results.

Even once you get results, you'd still have to do your analysis of the findings, which could result in countless more hours of work for too little benefit.

Here's where compensation benchmarking can be a real game-changer. Compensation benchmarking software gives you comprehensive, accurate information about executive salaries using the parameters you need and want. This service will improve your efficiency and give you a cost-effective way to evaluate executive compensation.

What Are the Advantages of Salary Benchmarking?

The best way to appreciate the advantages of salary benchmarking is to put yourself in an executive's shoes. If you were either looking to change jobs or to get a new job and you were looking at two companies of similar size with similar revenues, certain factors might come into play, such as location or familiarity with the company.

Remuneration packages often have many parts to them. Some components are easier to compare than other parts. Most executives have an opportunity to buy corporate shares at a certain price. Often, they have limitations as far as how long they must own them before selling, which is usually somewhere around three years. This type of compensation makes it difficult to compare manually.

Compensation benchmarking software includes an analysis of the frequency at which companies add share prices, which provides more accurate information. Compensation benchmarking software gives companies the ability to make comparisons between their figures and a large number of other businesses. The software can also calculate figures, such as the overall mean, upper quartiles and lower quartiles. In addition, the software also provides valuable information about proxy and investor guidelines.

Some Final Thoughts on Compensation Benchmarking Software

Executive compensation is sure to continue to be a hot-button item for the foreseeable future. If your company begins using compensation benchmarking software, you will realize many advantages from starting to use it sooner rather than later, placing you well ahead of the game. Compensation benchmarking software will save lots of money and labor hours of trying to do fruitless analyzations in-house. Most importantly, compensation benchmarking software positions you to where you can get and retain the top talent right now.