How to run a salary benchmarking exercise for your industry

Salary benchmarking — comparing your compensation levels to the market for similar roles in similar companies — is the foundation of any credible compensation strategy. Without it, you're either overpaying (which is a cost problem) or underpaying (which is an attrition problem) without knowing which.

Sources of salary benchmarking data for Indian companies: the Mercer Total Remuneration Survey and Aon Hewitt benchmarking surveys are the gold standard but expensive (typically ₹2–5L per survey). For most SMEs, accessible alternatives include: job postings on Naukri and LinkedIn (which show salary ranges for similar roles, giving you a real-time market indicator), AmbitionBox (employee-reported salary data, credible for larger companies), glassdoor.com (more useful for tech companies), and industry association surveys (some sector bodies conduct annual compensation surveys that are available to members at low cost).

Define your benchmarking peer group carefully. You want to benchmark against companies that are competing for the same talent — similar size (headcount and revenue), similar industry, similar geography, and similar growth stage. Benchmarking against MNCs when you're competing with funded startups for talent gives you the wrong reference point.

Benchmark at the role level, not just at the total headcount level. A software engineer, a sales manager, and a finance analyst at the same seniority have very different market rates. Benchmarking role by role tells you where your compensation is competitive and where it isn't.

Position yourself deliberately. Decide whether you want to pay at the 50th percentile (market rate — you retain people with other factors), the 60th (slightly above — makes compensation a mild positive in retention), or the 75th (top of market — compensation itself becomes a retention tool). This is a strategic choice tied to your ability to afford it and your talent strategy.