When a business is small, the founder can usually explain why everyone earns what they earn. A few years later, different starting offers, promotions and changing roles can leave you with a pay structure nobody deliberately designed. That is usually when the question appears: are we paying people properly? If the answer is unclear, recruitment gets harder, pay decisions become inconsistent and correcting gaps can become expensive.
Good salary benchmarking in the UK means comparing the work people actually do, the level they operate at, the market you recruit from, where they work, and the size and type of business you compete with. The benchmark shows what the market is doing; it does not automatically decide what your business should pay.
The latest Office for National Statistics Annual Survey of Hours and Earnings gives some sense of how quickly that picture moves. Median gross annual earnings for full-time employees who had been in their job for at least a year reached £39,039 in April 2025, up 4.3 per cent from £37,439 a year earlier. Median weekly earnings increased by 5.3 per cent. ONS ASHE 2025.
Those are national figures, not numbers we would use to price an individual role, but they illustrate the point: pay, roles and businesses all move, so your salary structure needs checking against all three.
What is salary benchmarking?
Salary benchmarking is the process of comparing what you pay for particular jobs with reliable external market data for comparable roles.
The important word there is comparable.
A job title alone is rarely enough.
Two businesses may both employ someone called a Marketing Manager, while one person manages a £3 million budget and a team of six and the other is the company's sole marketing employee. Those are not necessarily equivalent jobs just because the title matches.
A proper market salary comparison in the UK usually considers factors such as:
the work and responsibilities attached to the role
seniority and level
relevant skills or specialisms
sector
location
organisation size
the type of company you compete with for talent
the wider reward package
CIPD's 2025 factsheet Job evaluation and market pricing makes a similar distinction. It describes market pricing as gathering external data on equivalent jobs and emphasises the need to interpret that information rather than treat raw figures as definitive.
Before comparing yourself with the external market, you also need to understand your own jobs properly; otherwise, you can produce a very impressive spreadsheet comparing the wrong things.
Why does salary benchmarking matter more as an SME grows?
Pay can remain fairly informal for longer than people expect.
In a 12-person business, the founder may still know exactly why everyone earns what they earn. As the team grows, managers start making offers, new specialisms appear and different recruitment markets come into play. By 80 people, salary differences between apparently equivalent roles can become much harder to explain.
For an SME, salary benchmarking is not simply a recruitment exercise. It helps you answer several bigger business questions:
“Engagement survey data often presents people’s salary as their largest area of concern and dissatisfaction.” Aliya Vigor-Robertson, Founding Partner, JourneyHR
Can we recruit the people our growth plan depends on?
Are we at risk of losing people because our salaries have fallen behind?
Are people doing comparable work being treated consistently?
Have some salaries moved too far above the market?
Can managers explain how pay decisions are made?
What will correcting the structure cost?
Where do we actually want to sit in the market?
That final question is often overlooked.
There is no rule saying every company has to pay at the top of the market.
You may decide deliberately to pay around the market median while offering particularly strong progression, flexibility or benefits. For certain hard-to-recruit roles you may decide to pay considerably higher. A charity and a heavily funded technology company will probably make very different choices.
The benchmark provides the evidence; your reward strategy determines what you do with it. Our Pay + Benefits service can help shape that wider reward strategy.
CIPD describes effective reward as balancing the needs of employees, the business, and the organisation's purpose and performance. Pay is therefore part of a wider reward decision rather than a number considered in isolation.
How do you conduct salary benchmarking properly?
We normally think about the work in six stages.
The actual analysis can become quite detailed, but the thinking behind it should remain simple.
1. Start by deciding which roles you are actually comparing
You do not necessarily need to benchmark every job at once.
If this is your first exercise, start where the business question is strongest.
That might include:
roles you are struggling to recruit
jobs with high turnover
positions where managers keep asking for salary exceptions
roles that have changed significantly
jobs where employees are questioning pay
business-critical positions
groups where internal salary differences are difficult to explain
Then make sure the job information itself is current.
The job description may say one thing while the person has been doing something quite different for the last 18 months. Benchmarking the old description gives you a very precise answer to the wrong question.
2. Match the job, not simply the job title
This is probably the part we spend most time on.
A useful job match looks at the substance of the work.
For example, consider two Finance Managers.
One reports to a CFO, manages no one and has a largely operational remit.
The other reports directly to the founder, manages three people, owns forecasting and budgeting, works with investors, and effectively acts as the senior finance lead.
Calling both jobs Finance Manager does not make them equivalent.
Look at:
Scope. What is the person accountable for?
Complexity. How difficult are the decisions they make?
People responsibility. Do they manage employees, managers or nobody?
Commercial responsibility. Do they own revenue, budgets, clients or major decisions?
Expertise. Does the role require scarce technical knowledge?
Influence. How much of the organisation does the role affect?
This is why employee pay benchmarking sometimes uncovers organisational design questions as well as pay questions.
You may start by asking what a role should earn and discover that the bigger issue is that the role itself is not clearly defined. That is useful information. That is also where HR Policy + Process Consultancy can help.
What salary benchmark data should UK employers use?
There is no single salary database that gives you the definitive market rate for every job.
We would be very cautious of anyone claiming otherwise.
Good salary benchmark data for employers normally comes from several sources, considered together.
“Yet most businesses are still making decisions about pay and people without reliable data to guide them.” Sue Shaw, Founding Partner, JourneyHR
Sector salary surveys
Good specialist surveys can be particularly useful where the sector has distinctive jobs.
The closer the survey population is to the businesses competing with you for the same employees, the more useful the comparison becomes.
Check:
when the data was collected
how many employers contributed
whether the sample includes businesses like yours
whether figures are base salary or total cash
how roles were matched
whether London and regional salaries are separated
whether the data shows medians, quartiles or averages
An unexplained number is not particularly helpful simply because it came from a salary report.
Recruitment market data
Recruiters who specialise in a particular discipline or sector can give useful information about current hiring conditions.
It is worth distinguishing this from broader salary-survey data.
Recruitment data can show what candidates are currently being offered to move jobs. That may be higher than what established employees doing the same work currently earn.
That difference is often where salary compression begins.
Live vacancy data
Job advertisements can provide another useful reference point, particularly now that more employers publish salary ranges.
But use them carefully.
An advertised range tells you what an employer says it may pay. It does not necessarily tell you what somebody was eventually appointed on, how the role compares with yours, or where an existing workforce sits.
We would use vacancy data as one part of the picture rather than the entire benchmark.
How should you compare the salary data?
Once you have credible sources, the next question is where your people sit against them.
You might find, for example:
When an employee’s salary falls below the lower market range, it is important to review the accuracy of the role match, the employee’s stage of professional development, and potential recruitment and retention risks. A salary positioned around the market median is generally considered reasonable, particularly when the organization offers a competitive overall employee value proposition. Salaries above the market median may be justified for employees with specialized or scarce skills or extensive experience. However, when salaries are significantly above the upper market range, further review may be necessary to determine whether the job responsibilities have changed, the benchmark is inaccurate, or salary progression has exceeded the requirements and value of the role.
This is the beginning of the conversation.
It is not the decision.
Suppose someone is 12 per cent below your chosen market reference.
That does not automatically mean they receive a 12 per cent rise tomorrow.
You still need to understand:
where they sit within the role
their experience
whether they are still developing
internal comparisons
affordability
how quickly any correction should happen
whether the benchmark itself is a good match
And the reverse applies.
An employee whose salary is above a market benchmark has not done anything wrong.
Businesses can become unnecessarily concerned when somebody appears above market.
There may be a perfectly sensible explanation: long service, particularly valuable knowledge, broader responsibility than the job title suggests or a skill that was exceptionally difficult to recruit.
The question is not simply whether differences exist.
It is whether you can explain them properly.
Case study: what happened when we benchmarked salaries for a 20-person charity?
A JourneyHR salary benchmarking project using 2025 market data is a good example of why the job-matching stage matters so much.
We worked with a London-based membership and charitable organisation employing around 20 people, with positions ranging from administrative roles through to CEO level. The organisation had carried out salary benchmarking in 2022 and wanted to update it for 2025 as pay and living costs had moved.
The existing approach grouped jobs largely according to title and experience level.
On paper, that seemed reasonable.
But it created an issue.
The Executive Assistant problem
The Executive Assistant role had been included in the same banding approach as Administrative Assistant positions.
The responsibilities were different enough that grouping them together distorted the salary range. The comparison was effectively telling the organisation something about a group of mixed roles rather than giving it a clean benchmark for the EA position itself.
We recommended giving that role a separate band.
More broadly, we looked at roles through:
job title
department
organisational level
location
sector
company size
For each role, we used three to four relevant market comparisons and produced minimum and maximum averages. We then calculated where existing salaries sat against those ranges.
That gave the leadership team a far clearer view of where salaries were below the current market, where increases might need consideration, and where people were already above the benchmark.
There was another benefit too.
When somebody already sat above market, the organisation now had evidence to help manage expectations around future increases.
The eventual recommendations included defining clearer salary bands, using those bands in recruitment, evaluating roles more carefully by skill set and department, and building a Pay + Reward Policy.
The useful part of this project was not producing an external salary number; it was giving the organisation a much clearer way to make future pay decisions. That is what good benchmarking should leave behind.
What is the difference between a benchmark and a salary band?
A benchmark is external evidence; a salary band is an internal decision. They are connected, but they are not interchangeable.
You may decide that a particular role has an external market midpoint of £50,000. You might then create an internal band of £45,000 to £55,000 depending on experience and contribution.
Another business looking at exactly the same benchmark could create a different band because it has:
a different reward philosophy
different benefits
different affordability
harder recruitment conditions
different skills requirements
This is also where percentiles become useful.
The 50th percentile is the market median. Half the relevant observations sit below it and half above.
You might consciously choose to target the 50th percentile for most jobs and the 75th for particularly scarce positions.
What matters is that you know why.
‘That's what we paid the last person’ is not really a pay strategy.
How do you check internal fairness as well as the external market?
One of the biggest mistakes in salary benchmarking is looking outward without looking sideways.
External competitiveness is only one part of fair pay.
You also need to compare employees doing the same or equivalent work inside your own organisation.
That matters culturally, commercially and legally.
Under the Equality Act 2010, men and women are entitled to equal pay where they are performing equal work, unless the employer can establish a lawful material-factor explanation for the difference. Equal work can include like work, work rated as equivalent, or work of equal value. Pay includes basic salary and may also include contractual bonuses, pensions and benefits.
Acas also recommends that employers keep job descriptions current, use consistent approaches to setting pay and consider an organisation-wide pay structure as ways of reducing equal-pay risk.
Salary benchmarking does not on its own prove that your pay practices comply with equal pay law.
It can, however, make inconsistencies visible.
Suppose two employees in comparable roles should reasonably sit in the same range, but one earns £63,000 and the other £49,000. Before doing anything else, you need to understand why.
There may be an entirely legitimate explanation, or you may discover that historical negotiations, starting salaries or inconsistent promotion decisions have created a gap nobody intended.
Benchmarking gives you the prompt to investigate.
What should you do when someone is below the salary benchmark?
Do not rush to change the salary before understanding the reason.
First check the comparison: is it genuinely the same role, is the external data current, does it reflect your sector and location, and is the employee fully operating at the expected level?
If the answer to those questions is yes, then you can look at the gap and decide what is realistic.
For a small business, correcting every salary in one review cycle may simply not be affordable.
That does not mean ignoring it. You can prioritise significant retention risks and larger internal fairness concerns first, while smaller differences may be corrected through planned review cycles.
The real difficulty is having no plan.
Once you have identified a genuine pay inconsistency, leaving it unexplained or unaddressed can create employee relations and retention risk.
What about employees who are paid above market?
This needs just as much thought.
We would not normally recommend cutting someone's salary simply because new benchmark data places them above the current market.
Instead, understand why they are there.
An employee may sit above market because the job has grown, they carry unusual responsibility, you deliberately pay a premium for their expertise or their salary has moved more quickly than the market over time.
A clear salary band allows you to handle this sensibly. An employee near or above the top of a band may receive smaller base-pay increases while development, progression or other parts of reward become more important.
Again, explanation matters.
People do not need every employee's salary made public.
They do need confidence that there is a sensible process behind the decisions.
How often should salary benchmarking be carried out?
For most SMEs, an annual review is a sensible starting point.
JourneyHR's salary benchmarking service recommends benchmarking at least annually, with additional reviews when the market changes significantly. CIPD's 2025 Job evaluation and market pricing factsheet also says market-pricing exercises should be reviewed regularly to reflect changes to jobs, work and business needs.
But not every role needs a full external review every twelve months.
We would also revisit benchmarks when:
recruitment becomes unexpectedly difficult
several candidates reject the same salary
turnover increases in a particular team
responsibilities change substantially
the business enters a new region
a new skill becomes commercially important
managers repeatedly request salary exceptions
employees start raising concerns about pay consistency
A benchmark should not sit untouched in a folder until the next scheduled review if the market has obviously moved around it.
What should you communicate to employees?
A technically good salary benchmarking project can still lose much of its value if nobody understands how pay works.
Employees do not necessarily need your external data sources or every calculation. They do need to understand the principles.
For example:
how roles are placed into bands
what determines someone's position in a band
when salaries are reviewed
what progression means
whether promotion automatically changes the band
how market movements are handled
who makes salary decisions
Clearer salary structures also make life considerably easier for managers.
Instead of negotiating each request from scratch, they have a framework to refer to.
That consistency becomes increasingly important as founders stop personally making every pay decision. A Retained HR Team can help keep that framework consistent.
How JourneyHR can help
We carry out salary benchmarking for SMEs that need a clearer picture of both external market pay and what is happening inside their own organisation.
We start with the roles themselves, because we have seen how quickly an inaccurate role match can distort the rest of the analysis.
From there, we review relevant salary benchmark data for employers, compare roles with appropriate external sources and look at where existing salaries sit against the market. We can then help you think through salary bands, internal consistency, recruitment positioning and the practical implications of any gaps we find.
The outcome might be salary changes, better job architecture or a clearer explanation of how pay decisions are supposed to work. In many businesses, there is a bit of all three.
If you are reviewing pay, struggling to recruit at your current salaries, or simply want to know whether your structure still makes sense, we can help you work through it properly.
Final thought
Salary benchmarking is useful because it gives you evidence where pay decisions can otherwise become subjective, but the number is only the beginning. What matters is whether you can interpret the market data in the context of your business and make decisions you can explain consistently. Perfect consistency is unusual; clear reasoning is much more achievable, and it makes the next pay conversation considerably easier.
FAQs
What is salary benchmarking in the UK?
Salary benchmarking is the process of comparing salaries in your organisation with reliable external pay data for comparable UK roles. A good comparison considers the responsibilities and level of the role alongside location, sector, company size and relevant skills. The purpose is to understand your market position and use that evidence when setting salary bands and making pay decisions.
What salary benchmarking data should a UK SME use?
UK SMEs can use ONS earnings data, credible sector salary surveys, specialist recruitment data and carefully selected live vacancy information. We would normally use more than one source rather than relying on a single advertised salary or job-board average. ONS ASHE data is particularly useful because it provides official earnings information by occupation and region.
How often should an employer benchmark salaries?
Annual salary benchmarking is a sensible starting point for most employers, but you should review particular roles sooner when recruitment conditions, responsibilities or local markets change significantly. Persistent vacancies, repeated salary negotiations and increased turnover in one job group can all indicate that your existing benchmark needs checking before the next annual cycle.
Does salary benchmarking mean we have to pay the market average?
No. A salary benchmark gives you market evidence rather than dictating what you must pay. Your business might deliberately position some roles around the median, pay more for scarce skills or combine competitive salaries with stronger benefits and flexibility. What matters is having a consistent reward philosophy and being able to explain why you have chosen your particular market position.
Can salary benchmarking help identify equal pay problems?
Salary benchmarking can reveal unexplained differences, but it does not by itself establish whether you comply with equal pay law. Employers should also compare people doing equal work internally and understand the reasons for differences. Acas advises employers to use current job descriptions and consistent pay-setting practices to reduce the risk of unequal pay.
