How do we know what the market pays? A practical guide to pay benchmarking

08th June 2026

Julia Hanna

I’ve spent more than 20 years helping organisations develop reward strategies, benchmark pay and design job architecture frameworks. In this series, I answer some of the most common questions I hear from HR and business leaders.

One of the most common questions I hear from leaders is: ‘What does the market pay?’.

This is where pay benchmarking comes in.

Pay benchmarking is the process of comparing your reward packages with those offered by other employers for similar roles. Used well, it can provide valuable insight into market practice and help organisations make informed reward decisions.

Used badly, it can create a false sense of certainty and lead to expensive mistakes.

Why does pay benchmarking matter?

Employees don’t compare their pay against an abstract number. They compare it against what they believe they could earn elsewhere.

At the same time, organisations need to balance competitiveness with affordability. Pay benchmarking helps answer questions such as:

Are we paying enough to attract talent?
Are we losing people because of pay?
Which roles are most exposed to market pressures?
How do our reward packages compare with competitors?
Where should we invest limited reward budgets?

Market pricing is one of the most widely used tools in reward management because it provides an external reference point for decision making.

The key phrase there is ‘reference point’. Benchmarking should inform decisions, not make them for you.

What does good pay benchmarking look like?

The quality of your benchmarking is only as good as the quality of the data and the accuracy of the role matching. In my experience, one of the biggest mistakes organisations make is focusing on job titles.

Job titles tell us very little. A ‘Head of HR’ in one organisation might lead a team of three. In another, they could lead a global function of hundreds. Good benchmarking focuses on:

Role responsibilities and strategic impact
Decision-making authority
Size and complexity of the organisation
Reporting relationships

The objective is to compare roles that are genuinely similar, not simply similarly named.

Not all market data is equal

There are many sources of salary data available today.

Job adverts – job adverts are often the first place people look. The challenge is that a single advert represents a sample size of one. Advertised salaries are designed to attract candidates and may not reflect what is paid to internal job holders. They often provide limited information about the wider reward package.
Crowd-sourced websites – online salary websites can provide useful insights and are often very current. However, most rely on self-reported information. People may misunderstand their reward package, report inaccurate figures or simply inflate earnings. Matching is also typically based on job title alone.
Published salary surveys – published salary surveys remain the gold standard for most organisations. Unlike many online salary websites, the data is typically supplied directly by employers and validated by an independent third party. The CIPD Reward Factsheet highlights the importance of using robust market data as part of a wider reward decision-making process. High-quality surveys provide robust matching methodologies, large sample sizes and information on bonuses, benefits and market practice as well as salary.
Specialist surveys – for niche sectors or specialist roles, private surveys can provide valuable additional insight where broader market data is limited.
Learning from real organisations – some organisations deliberately position themselves differently from the market. Netflix is famous for its philosophy of paying employees at the top of their personal market. Aldi and Lidl have regularly used pay as a differentiator in the retail labour market. Both approaches are strategic choices. They are not based on blindly following market data. They use market data to support a clear reward strategy.

Common mistakes

One of the most dangerous phrases in reward is: ‘The market median says…’. The market median simply describes what other organisations, with other reward strategies, pay for similar (but not the same) roles. It doesn’t tell you what you should pay.

Another common mistake is using poor role matches. This creates misleading results and undermines confidence in the process.

My golden rule

The market median is not the answer. It is simply a useful reference point. The right pay decision depends on many factors, including:

Your reward strategy
Internal pay relationships
Skills shortages
Business performance
Affordability

Market data helps inform decisions. It should never replace judgement.

The takeaway

Pay benchmarking is one of the most powerful tools available to reward professionals.

But benchmarking isn’t about finding the ‘correct’ salary. It’s about understanding the market, interpreting the evidence and making informed decisions that are right for your organisation.

This article is part of Verditer’s Reward Essentials Series, exploring the questions that sit behind effective reward management. This series includes:

How we can help

At Verditer, we are specialists in pay foundations including creating career levels, carrying out pay benchmarking and developing pay structures . Contact us if you’re looking for external expertise.

Follow our LinkedIn company page and sign up for our newsletter to hear about future blogs.

Related Insights

How do we decide our approach to reward? A practical guide to reward strategy

Part of Verditer's Reward Essentials Series, exploring the questions that sit behind effective reward management.

How do we determine the relative size of our roles? A practical guide to job evaluation

Part of Verditer's Reward Essentials Series, exploring the questions that sit behind effective reward management.

Business people talking in cafe - pay and reward consultancy

Contact us

Get in touch today

We’d love to hear from you. To find out how we can partner to get more out of reward, please enter your details below and we’ll get back to you as soon as we can.