Incentives for Growing Companies No.1: Salary Benchmarking

Salary benchmarking allows a company to compare their current salary offering with industry norms, by looking at how comparable companies pay roles with similar levels of responsibility, workload, scale, span of control and complexity. The comparable companies are typically identified based on: size (revenue, market cap), sector, location, listed (or not listed) and growth. A basket of broadly similar companies forms a ‘peer group’ that is looking to recruit, and retain, individuals with the same talent, skills and capabilities.

However…

…it is worth noting that salary benchmarking is always looking backwards. This is inevitable, given the available data is published, or made available privately, from the past. This means you – as a consumer of ‘market benchmark data’ - are typically looking at the picture from at least a year ago, and then comparing this with your current pay data. The ‘latest disclosed data’ from annual reports typically lags by 6 to 9 months, for example.

This is why we suggest to our clients that they benchmark salaries based on organisations’ future positioning (using a 12 month forecast). This allows them to stay ahead of the ‘data lag’, and provide competitive salaries for work to date, and in the next 12 months.

We provide the latest salary benchmarking data available below for FTSE SmallCap and FTSE AIM companies (data sourced from our E-Reward Database and other databases):

• Median salary increases for CEOs in 2023 for FTSE SmallCap companies was 3.4% with median base salary at £459,000.
• For FTSE AIM 100 CEOs this was slightly lower with a median salary increase of 3.0% and median base salary of £349,000.
• For those companies that have released their 2023 salaries, they have stated that salary increases for executives will be set below the wider workforce which typically ranges from 3% to 4.8%.
• Investors in the UK have begun to take a toughening stance regarding large increases to executive pay, given the absolute impact of such increases on costs, and the wider workforce

Whilst offering competitive salaries is important in retaining and attracting the right talent, it isn’t the biggest piece of the pie which will ultimately pull or push people in and out of organisations. The largest slice comes in the form of variable pay – short and long term incentives. We discuss the importance of variable pay in our article Performance Based Remuneration (coming soon...).