Salary benchmarking should be the cornerstone of every organisation’s reward and retention strategy. When done well, it gives leaders confidence to make pay decisions that are fair, competitive, and defensible. When done poorly, it can lead to disengagement, inequity, and wasted spend.

Here are some of the most common mistakes organisations make in salary benchmarking and how to steer clear of them.

1. Using outdated data

Many HR and finance teams still rely on annual or bi-annual salary surveys. By the time the data is published, it can already be 6–12 months old. In a market where salary shifts can occur quarterly, outdated data risks under or over-paying talent.

How to avoid it:
Use real-time or continuously updated benchmarking tools that reflect what’s happening now, not last financial year. Real-time data helps you identify trends early and respond to market shifts before they impact retention.

2. Comparing the wrong roles

One of the biggest sources of error comes from mismatched role titles. An "account manager" can mean anything from a junior coordinator to a senior client lead depending on the company. Comparing job titles without aligning job scope, responsibility, and level leads to inaccurate benchmarks.

How to avoid it:
Always match by job content, not title. Use frameworks or tools that analyse core competencies, responsibilities, and seniority to ensure you’re comparing like with like.

3. Failing to segment by market or location

Salary levels can vary dramatically across regions, even within the same country. A Wellington-based role might pay 10–15% less than an Auckland one. Applying one benchmark across all offices leads to distorted pay decisions.

How to avoid it:
Segment your benchmarking data by location, industry, and organisation size to reflect real market variation. This is especially important for remote or hybrid teams where location is a growing pay differentiator.

4. Treating benchmarking as a once-a-year exercise

Markets move fast. Cost of living changes, talent shortages, and new competitors can all shift pay expectations within months. Companies that benchmark once a year end up reacting too late, losing good people before they can adjust.

How to avoid it:
Adopt a continuous benchmarking approach. Modern platforms allow real-time updates and rolling reviews so that salary decisions are proactive, not reactive.

5. Not linking data to business outcomes

Benchmarking isn’t just about being market competitive. The goal is to attract, retain, and engage the right people without overspending. Too often, benchmarking sits as an HR task rather than a strategic business tool.

How to avoid it:
Translate your benchmarking insights into business language. Show how pay decisions affect turnover, productivity, and overall labour cost. When HR and finance speak the same language, remuneration becomes a lever for strategy, not just compliance.

6. Ignoring internal equity

External benchmarking is critical, but internal fairness matters just as much. It’s possible to be perfectly aligned to market and still have significant internal pay inequities, especially across gender, ethnicity, or tenure.

How to avoid it:
Complement external benchmarks with internal equity analysis. Regularly review gender and ethnicity pay gaps, pay progression by tenure, and compa ratios across teams to ensure fairness and compliance.

7. Over-relying on averages

Averages can hide a lot. Median or mean salaries don’t reflect nuances such as role scarcity, company performance, or experience mix. Relying on a single figure can create inflexibility and missed opportunities to reward high performers.

How to avoid it:
Look beyond averages. Review pay ranges, percentiles (for example, 25th, 50th and 75th percentiles), and context such as turnover and demand trends. Data should inform judgment, not replace it.

Final thought

Salary benchmarking is both art and science. The science lies in the data. The art lies in interpreting it within the context of your people, strategy, and market. Avoiding these common mistakes ensures your pay decisions are credible, competitive, and fair — and that your people see their value reflected not just in words, but in pay.

About LiveRem

LiveRem helps employers benchmark salaries with real-time data and gain insights into key HR metrics like turnover and pay gaps. By replacing outdated salary surveys with live data, LiveRem enables HR and finance leaders to make faster, fairer, and more confident pay decisions.