What is global salary benchmarking?

In a global job market, compensation expectations shift fast. Hiring across countries or building a distributed team requires a structured compensation strategy that keeps you competitive. Benchmarking uses real-world salary survey data to inform your compensation planning. This leads to better offers, stronger retention, and fewer compliance surprises across regions.

This is only made more crucial by the wide and continued adoption of remote work, with 2021 data showing that in key industries like software publishing and insurance, the majority of workers (over 50%) worked from home.

As industries, cultures, and trends change, a business that isn't paying attention can quickly find itself losing talent, money, and reputation. To avoid this, it's necessary to look at global salary benchmarking data and set a strategy for how the business will approach questions of hiring and salary going forward.

Understanding global salary benchmarking

Global salary benchmarking is the process of gathering industry-relevant data about how employees of similar skill levels, responsibilities, and tenures are paid across different locations worldwide. It includes cost-of-living adjustments to ensure fair, competitive compensation regardless of where your team members are based.

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This gives leadership an idea of how much an employee will expect to make in their role depending on where they are based, and it allows them to ensure their salary stays fair and competitive. Global salary benchmarking can also be used to devise and standardize an appropriate strategy for career growth plans for global teams.

Benefits of global salary benchmarking

So, what are the benefits of global salary benchmarking? Here's what it delivers:

• Better talent acquisition: Competitive local rates attract top talent you might otherwise miss with flat global salaries.

• Reduced team tension: Transparent, fair compensation policies prevent resentment and build trust across distributed teams.

• Improved retention: Employees who understand how their pay was determined—and see it's market-competitive—are more likely to stay, particularly as research shows pandemic-era productivity gains did not always result in increased compensation to workers.

How to conduct global salary benchmarking

Conducting global salary benchmarking might seem complex, but breaking it down into clear steps makes the process manageable. Here's a simple approach to get started.

• Define job roles and levels. Start by creating clear job descriptions and a leveling framework. This ensures you're comparing similar roles and responsibilities across different markets.

• Gather market data. Collect salary information from reliable sources for each location where you have or plan to hire employees. This is where you'll identify the typical pay for your defined roles.

• Analyze the data and create salary bands. Once you have the data, analyze it to establish a minimum, midpoint, and maximum salary for each role and level. These salary bands provide a consistent framework for compensation decisions.

• Develop a compensation philosophy. Decide how you want to position your company in the market. Will you pay at, above, or below the market average? Your philosophy should align with your business goals and budget.

• Communicate the strategy. Be transparent with your team about your compensation philosophy and how salaries are determined. This builds trust and helps employees understand their value within the organization.

Data sources for global salary benchmarking

Finding accurate and relevant salary data is the cornerstone of effective benchmarking. For global teams, this means looking beyond a single source. Here are a few common places to find reliable data.

• Compensation survey providers: These are companies that specialize in collecting and selling compensation data from thousands of businesses. They offer detailed insights but can be costly.

• Government data: Many countries publish national or regional labor statistics, which can provide a baseline understanding of salary trends. While often free, this data may not be specific enough for specialized roles.

• Global employment platforms: Platforms like Oyster provide built-in salary data and insights as part of their service. This integrates benchmarking directly into the hiring workflow, simplifying the process for People Ops teams.

Tools for global salary benchmarking

The right tools can turn salary benchmarking from a manual headache into a strategic advantage. While spreadsheets can work for very small teams, they quickly become unmanageable as you scale globally.

Modern compensation software automates data collection but often requires complex integrations. A simpler approach? An all-in-one global employment platform.

For example, Oyster's Salary Insights tool integrates directly into your hiring workflow, covering 130+ countries. The result: faster decisions, fewer errors, and competitive offers from day one.

Key components of global compensation benchmarking

A competitive offer is about more than just base salary, and with remote work being linked to a decrease in unit office building costs, companies have an opportunity to reinvest those savings into the total rewards package. True benchmarking considers the entire compensation package, which is often referred to as total rewards. When evaluating compensation, be sure to look at all the components that contribute to an employee's financial well-being.

This includes not only base pay but also variable pay like bonuses, sales commissions, and equity. It's also critical to benchmark statutory and supplemental benefits, such as health insurance, retirement plans, and paid time off, as these vary significantly by country. A holistic approach ensures your offers are attractive and equitable on a global scale.

Advanced implementation strategies for global salary benchmarks

Here's the reality: compliance comes first when implementing global salary benchmarks. Local laws—not your preferences—determine what's acceptable.

Each country has unique requirements, from mandatory 13th-month salaries to specific bonus structures. Unions can also influence pay standards. The key is building compliance checks directly into your benchmarking process.

Remember: salary is just one piece of the puzzle. Total compensation includes benefits, stipends, and perks that vary significantly by location.

Key decisions you'll need to make:

• Local vs. global benefits: Which perks stay location-specific, and which apply company-wide?

• Mandatory payments: Some countries require 13th-month salaries or specific bonus timing.

• Equity considerations: How do you balance local requirements with internal fairness?

Building a competitive global compensation strategy

Global salary benchmarking is more than a box-ticking exercise; it's a foundational piece of building a fair, competitive, and sustainable global team. By understanding local market rates and adopting a clear process, you can create a compensation strategy that attracts and retains top talent, no matter where they live.

With the right data and a clear process, you can build a compensation strategy that attracts and retains top talent worldwide. Oyster's global employment platform simplifies this process, helping you start hiring globally with confidence.

FAQs

What is the formula for salary benchmarking?

There isn't one single formula, but a common approach is: (Job Family + Level) x Location Factor = Base Salary. The job family and level determine the baseline value of the role, while the location factor adjusts it for local market rates and cost of living.

What is the best salary benchmarking tool for global teams?

The best tool depends on your needs. For comprehensive, standalone data, survey providers are a strong choice. For businesses that want to integrate benchmarking directly into their hiring workflow, a global employment platform like Oyster with built-in salary insights offers the most seamless experience.

How do you benchmark salaries for remote employees in different countries?

You benchmark them based on the local market data for where the employee lives and works. This approach ensures the salary is fair and competitive relative to their local cost of living and market rates, rather than tying pay to a headquarters location.