In globally expanding workforces, employers face a pressing challenge: how to pay teams fairly across borders while balancing market demands, compliance, and talent expectations. For organizations scaling internationally, salary benchmarking isn’t just a best practice—it’s a necessity. By aligning pay with global standards, businesses can foster trust, avoid costly missteps, and build teams poised for long-term success.
What is salary benchmarking, and why does it matter?
Salary benchmarking compares internal compensation data to external market rates to ensure competitive, equitable pay across global teams. Here are some key reasons why benchmarking salaries matters in today’s global workforce.
Attracts top talent with competitive pay
In a world where skilled professionals weigh multiple offers, compensation remains a decisive factor. Recent Gallup research found that 54% of employees consider salary a top reason for leaving roles, while transparent, market-aligned pay signals credibility to candidates. For global hires, localized benchmarking accounts for regional cost-of-living variances, industry norms, and benefits expectations.
Improves employee retention and satisfaction
Pay disparities erode trust and fuel turnover. Benchmarking identifies gaps where internal salaries lag behind market rates, enabling proactive adjustments. Companies prioritizing equitable, transparent compensation see 30% lower intend-to-quit rates, as employees feel valued and are less likely to seek external opportunities.
“Posting salary bands publicly and having open conversations about pay with your teams signal to current and future employees that you’re forward-thinking, have your ducks in a row, and, most importantly, care about compensating people fairly,” said Lexi Clarke, Chief People Officer at Payscale. “Employees want to stick with employers who they feel truly have their back, and pay transparency is a great way to build that trust.”
Ensures fair pay and compliance with evolving laws
From the EU’s Pay Transparency Directive to U.S. state-level mandates, regulations increasingly require employers to disclose salary ranges and justify pay decisions. Benchmarking provides the data-driven foundation to meet these requirements while addressing equity gaps across gender, ethnicity, and geography.
For HR leaders, salary benchmarking is the first step in building a scalable compensation strategy. Below, we provide a step-by-step guide to conducting salary benchmarking.
To help put this into perspective, our employee cost calculator can help accurately budget payroll costs.
Step-by-step guide to conducting salary benchmarking
Navigating salary benchmarking requires a strategic approach tailored to the organization’s global footprint and talent priorities. By focusing on critical roles and leveraging reliable data, HR teams can build compensation planning frameworks that balance competitiveness with equity. Let’s break down the process, starting with the foundational step of defining benchmark roles.
Step 1: Define benchmark roles
Not every position requires benchmarking. Focus on roles that directly impact retention, recruitment, and organizational performance. Prioritize high-turnover positions—such as sales or tech roles—in volatile markets, where competitive pay gaps may drive attrition.
Hard-to-fill jobs, like niche engineering or AI specialists, also demand precise market alignment to address talent shortages. For leadership, ensure C-suite and executive pay reflects industry standards to avoid mismatched incentives during global expansions.
Accurate role definition is critical. Start by auditing internal job descriptions to ensure they reflect current responsibilities, skills, and outcomes—not just titles. For example, a “Customer Success Manager” in one region might align with a “Client Solutions Lead” elsewhere, requiring granular comparisons of duties and impact.
Cross-reference these details with industry-specific competency frameworks to eliminate ambiguities that skew data. This clarity ensures apples-to-apples comparisons, whether it’s analyzing salaries in Berlin or Bangalore.
Step 2: Gather market data
Accurate benchmarking hinges on diverse, high-quality data sources. Global HR consultancies like Mercer, Willis Towers Watson, and Korn Ferry provide detailed salary surveys segmented by industry, seniority, and geography—particularly valuable for multinational comparisons. Employer-reported platforms (e.g., Glassdoor, Payscale) and LinkedIn Salary Insights offer real-time snapshots of regional pay trends but may lack nuance for specialized roles.
Government agencies add critical context: The EU’s Eurostat publishes wage statistics across member states, while the U.S. Bureau of Labor Statistics outlines occupational earnings. Industry-specific guides, like the Hays Salary Report, decode niche markets such as renewable energy or fintech. For emerging markets, combine localized compensation platforms with in-country surveys to navigate sparse data.
Modern HR analytics tools (e.g., Payfactors, Salary.com) automate data aggregation and adjust for variables like remote work premiums or cost-of-living indexes.
Pro Tip: Cross-reference at least three sources to mitigate outliers. This strategy has been proven to reduce benchmarking errors by 40% in volatile regions.
“Staying up to date with market data amid continuously evolving circumstances helps you to discern temporary versus permanent adjustments to meet new market realities,” said Hatti Johansson, WTW’s Global Innovation and Product Development Leader. “Leveraging the research to proactively make fair and competitive pay decisions can also help prevent actions that may unintentionally damage employee morale and employer reputation in the long run.”
Step 3: Analyze compensation trends
Understanding market dynamics requires dissecting how external forces shape pay standards. While benchmarking data provides a snapshot, trends reveal where salaries are headed—and why.
- Industry and market demand. Tech and healthcare roles often outpace retail or manufacturing in salary growth due to innovation cycles and talent scarcity. For example, in 2024, machine learning (ML) engineers commanded 20% higher premiums than traditional software roles in competitive markets.
- Geographic location. A senior developer in London earns significantly more than one in Lisbon, reflecting cost-of-living disparities. Remote work complicates this: Employers now adjust pay based on employee location or adopt “global middle” approaches for distributed teams.
- Experience and skill demand. Niche certifications (e.g., AWS architecture) can elevate pay by 25% to 30% while generalist roles plateau. Industries like cybersecurity prioritize hands-on incident response experience over degrees, reshaping traditional qualification hierarchies.
- Company size and funding stage. Startups often pay as much as 30% to 40% below enterprise peers but counter with quality equity programs. Late-stage private firms, however, align closer to public company benchmarks to attract executives eyeing IPOs.
Pro tip: Blend historical data with forward-looking indicators (venture funding flows, regulatory changes) to anticipate shifts. For instance, Germany’s 2025 carbon tax phase-in is driving clean energy salary premiums before legislation takes effect.
Step 4: Compare and adjust salaries
A gap analysis bridges internal pay structures with market realities. Start by overlaying current salary bands against external benchmarks for each role—flagging positions where compensation falls 15% below or 10% above regional averages. For example, tech roles in Mexico City often require market-aligned premiums due to U.S. remote hiring competition, while overpaid administrative roles in stagnant industries may signal bloated budgets.
Strategic adjustments balance competitiveness with fiscal responsibility. Prioritize underpaid mission-critical roles (e.g., cybersecurity leads) with phased raises, while freezing overpaid non-essential positions. Factor in total compensation: A Berlin-based engineer’s lower base salary might align with benchmarks once EU-mandated pensions and healthcare are included.
Salary reviews and pay equity audits are non-negotiable. Tools like PayAnalytics or Trusaic scan for disparities across gender, ethnicity, and age—critical as Spain’s 2024 pay transparency laws now require public disparity reports. For global teams, adopt geography-neutral benefits (e.g., learning stipends) to offset regional base pay gaps.
Pro Tip: Phase adjustments over quarters to manage budgets, and tie executive bonuses to equity improvement metrics.
Step 5: Review annually and stay competitive
Annual salary benchmarking isn’t a “set and forget” process—it’s a defense against market volatility. Inflation erodes purchasing power. For instance, companies in Argentina or Turkey now conduct quarterly pay reviews as local currencies fluctuate.
Economic shifts also reshape demand: A 2024 tech slowdown saw developer salaries dip after a decade of growth. Annual reviews prevent salary compression, where new hires outearn tenured peers—a risk heightened by quiet hiring spikes in competitive sectors like healthcare.
Best practices blend consistency with agility. Schedule bi-annual reviews for high-turnover industries (e.g., retail, logistics) and use AI tools to track real-time shifts across various markets. Align adjustments with performance. Say revenue grows 12%, so the target salary increases between 5% and 7% to balance retention with margins.
Common mistakes to avoid in salary benchmarking
Even the most well-intentioned benchmarking efforts can backfire without careful planning. Poor practices not only skew compensation data but also risk employee trust and compliance—especially as global pay transparency laws tighten. Below are critical pitfalls to sidestep.
Relying on outdated or single-source data
Using salary surveys from 2023 to set 2025 pay bands ignores inflation spikes or post-pandemic tech sector corrections. Similarly, over-depending on one source—like generic job board averages—fails to capture niche role premiums (e.g., AI ethics officers).
Ignoring geographic and industry nuances
Paying a Berlin-based UX designer the same as one in Budapest overlooks Germany’s higher cost of living and mandated benefits. Similarly, benchmarking a nonprofit’s Program Manager against a startup’s hybrid role (operations + fundraising) invites mismatches. Always adjust for regional norms and dissect job duties beyond titles.
Overlooking total rewards beyond salary
Focusing solely on base pay neglects how benefits like equity (critical for startups), remote work stipends, or learning budgets can tip the scales. For instance, a Mexican developer might accept a 10% lower salary if given U.S.-level healthcare—a perk worth 18% of total comp in local terms. Audit perks through tools like PayAnalytics to quantify their market value.
Failing to communicate adjustments transparently
Silently raising new hire pay while legacy staff stagnate fuels distrust. A transparent pay directive mandates explaining gaps and should be accompanied by proactive communication. Communicate benchmarking methodologies clearly and tie raises to transparent metrics.
Get a confident handle on global employee salaries
Global salary benchmarking requires precision, localized insights, and agility in an ever-changing market. Velocity Global simplifies this complexity by offering integrated global payroll solutions and compensation expertise, ensuring employee salaries remain competitive across 185+ countries while maintaining compliance with local regulations. Partner with Velocity Global to seamlessly adapt compensation policies and strategies to regional demands and attract top talent worldwide. Get in touch to learn more.
