HR Perspective with Memory Nguwi
MOST organisations do not lose good employees because they deliberately choose to underpay them. They lose them because they do not know how far their salaries have drifted from the market over time. Most employers genuinely want to pay fairly and retain their best people. The problem is usually a lack of reliable market information rather than a lack of commitment.
The labour market changes continuously, whether organisations notice it or not. New employers enter the market, specialist skills become scarce, inflation changes employee expectations, and competitors revise their pay levels. A salary that was competitive two years ago may no longer be competitive today. Organisations that fail to monitor these changes eventually find themselves paying salaries that no longer reflect market reality.
Many organisations assume that because they conducted a salary survey a few years ago, their pay remains competitive. Unfortunately, the labour market does not stand still while salary structures remain unchanged. Every year that passes without benchmarking increases the likelihood that salaries drift away from market levels. By the time management notices the problem, valuable employees may already be considering opportunities elsewhere.
One of the biggest mistakes organisations make is relying on assumptions when making salary decisions. Managers often believe they understand what competitors are paying based on conversations, rumours, or recruitment experiences. These sources rarely provide a complete or accurate picture of the market. Sound remuneration decisions should always be based on objective rather than subjective evidence.
Regular market salary comparisons provide that evidence. They show exactly which positions are below the market, which are aligned with the market, and which are already above it. This enables management to target salary adjustments where they are genuinely needed instead of increasing salaries across the board. The result is better use of remuneration budgets and stronger pay competitiveness.
Market salary data is often viewed as useful only during annual salary reviews. That view significantly underestimates its value. Reliable market data support almost every important decision an organisation makes throughout the year. It provides a foundation for recruitment, retention, budgeting, pay structure design, and workforce planning.
Recruitment is one area where market salary data delivers immediate value. Organisations that consistently fail to attract qualified candidates often assume there is a skills shortage. In many cases, the real problem is that their salary offers are simply not competitive. Market data allows organisations to make offers that reflect current labour market conditions instead of relying on outdated assumptions.
Retention is another area where salary benchmarking makes a significant difference. Employees rarely resign immediately after becoming dissatisfied with their pay. They usually spend months comparing opportunities and quietly testing the market before making a decision to leave. Regular salary comparisons allow organisations to identify emerging pay gaps before they become costly resignations.
The financial cost of replacing experienced employees is often underestimated. Recruitment expenses, onboarding costs, lost productivity, training, and the time required for a replacement to become fully effective can be substantial. These costs frequently exceed the salary adjustment that might have retained the employee. Preventing unnecessary turnover is therefore both a people strategy and a financial strategy.
Market salary information is equally valuable when creating new positions. Organisations frequently struggle to determine the appropriate salary for roles that have never existed before. Guesswork often results in salaries that are either too low to attract talent or unnecessarily high. Credible market data provides a far more reliable starting point for pricing new jobs.
Salary benchmarking also plays a critical role in developing credible pay structures. Pay ranges should reflect both internal job value and external market competitiveness. A technically sound grading structure can still fail if the salary ranges attached to it are significantly below market levels. Market salary surveys help ensure that pay structures remain relevant and sustainable.
Another important benefit of salary benchmarking is improved budgeting. Finance departments can forecast future remuneration costs more accurately when they understand market movements. This allows organisations to plan salary adjustments well in advance instead of reacting to unexpected pressures. Better planning leads to more sustainable financial management.
Credible market data also improves the quality of executive and board decision-making. Discussions about remuneration become evidence-based rather than driven by personal subjective opinions or negotiation. HR professionals are able to present objective recommendations supported by independent market information. This strengthens confidence in remuneration decisions across the organisation.
Market salary comparisons also prevent organisations from making the opposite mistake of paying well above the market without a deliberate strategy. Excessive salaries increase employment costs and reduce financial flexibility. They may also create internal pay inequities that become difficult to justify over time. Effective remuneration management is about paying competitively, not simply paying more.
Every organisation should have a clear market positioning strategy. Some organisations deliberately choose to lead the market because they compete for scarce skills. Others target the market median while differentiating themselves through career opportunities, incentives, or workplace culture. Whatever strategy is adopted, it should be supported by current market evidence rather than assumptions.
One dangerous assumption is believing that employees who are not complaining must be satisfied with their pay. Many employees never raise salary concerns with management. Instead, they quietly search for better opportunities and resign when the right offer appears. By then, the organisation has lost the opportunity to address the problem proactively.
The cost of conducting a credible salary survey is usually insignificant compared to the cost of poor remuneration decisions. Losing one key employee, making repeated unsuccessful recruitment attempts, or granting poorly targeted salary increases can cost far more than the survey itself. Reliable market data helps organisations avoid these expensive mistakes. It is one of the highest-return investments an organisation can make in its people strategy.
Organisations that benchmark their salaries regularly consistently make better remuneration decisions. They attract stronger talent, retain high performers, build credible pay structures, and allocate salary budgets more effectively.
l Nguwi is the managing consultant of Industrial Psychology Consultants and a registered occupational psychologist.