Salary benchmarking

Salary benchmarking is the process of comparing the pay rates for roles at your business against industry standards or similar positions in your geographic area.

Homebase Team

Min Read

What is salary benchmarking?

Salary benchmarking is the process of comparing the pay rates for roles at your business against industry standards or similar positions in your geographic area. It helps employers understand whether they’re offering competitive, fair wages and supports smarter decisions around compensation planning, hiring, and employee retention.

For small business owners, salary benchmarking isn’t just about staying competitive—it’s also about staying compliant and building trust with your team. It gives you a clear, data-backed view of how your pay stacks up and where you might need to adjust. If you want to simplify payroll and performance tracking while staying on top of compensation, sign up for Homebase.

Why salary benchmarking matters for small businesses

Competitive pay is one of the most important factors for attracting and retaining talent—especially in hourly and shift-based roles. Salary benchmarking helps you:

Avoid underpaying (which can lead to turnover)
Avoid overpaying (which can stretch your budget)
Stay in line with local and industry wage trends
Support pay equity and transparency across your team
Confidently manage raises, promotions, and new hire offers

Even small differences in pay can affect how employees feel about their work—especially if they suspect a competitor is offering more.

What to include in a salary benchmark

True benchmarking goes beyond just the base wage. A complete comparison includes:

Hourly or annual pay rate
Bonuses or tips
Benefits (health, dental, vision)
Retirement contributions or matching
Perks (free meals, flexible schedules, learning opportunities)

A lower wage might be offset by excellent perks or flexibility, while a higher wage might not be enough if the rest of the package is lacking.

How to conduct salary benchmarking

Here’s how small businesses can get started:

Identify key roles to benchmark (start with your most common or hardest-to-fill positions)
Gather data from:
- Government sites like the Bureau of Labor Statistics
- Online salary tools like Glassdoor, Indeed, and Payscale
- Industry-specific wage reports
Adjust for location – Pay expectations vary dramatically by city, region, and cost of living
Review your own compensation data – Consider what you’re currently paying, and whether raises or reclassification are needed
Document and review – Keep a running list of benchmarks and review them at least annually

This process doesn’t need to be complicated. You can even set a calendar reminder once a year to update your benchmarks.

Common salary benchmarking pitfalls to avoid

Relying on job titles instead of duties – Make sure you’re comparing roles with similar responsibilities
Using outdated data – Labor markets shift quickly
Ignoring internal equity – Pay gaps within your team can affect morale and legal compliance

Clear communication with your employees about how compensation is set builds long-term trust.

How Homebase supports smarter pay decisions

Homebase helps small businesses stay organized and fair when it comes to compensation. With built-in payroll, time tracking, and team management features, you can:

Track and compare wages across roles and employees
Set and update pay rates by position or location
Forecast labor costs in real-time
Store pay policies, raise guidelines, and team performance records

Explore Homebase’s Hiring & onboarding tools to simplify how you plan, manage, and communicate team compensation—without needing a full HR department.

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