Strategic Compensation: The Value of Salary Benchmarking and Proactive Benefits Planning

In today’s competitive labour market, we are all working hard to attract and retain the best talent while delivering both equity and fiscal responsibility. Compensation and benefits decisions are essential for building a high-performing, engaged workforce. When implemented effectively, the ‘right’ compensation and benefits promote fairness, transparency, competitiveness, and long-term cost control. What can we learn about the role of salary benchmarking and proactive benefits planning to get to the ‘right’ compensation and benefits?

The Role of Salary Benchmarking

In simple terms, we know salary benchmarking compares an organization’s pay levels with those of peer employers, typically within the public sector and comparable private sectors. Benchmarking provides a data-driven foundation to ensure compensation is both competitive and equitable.

1. Attracting and Retaining Talent

Municipalities compete not only with each other but also with the private sector, where we know compensation can be more flexible and creative. Benchmarking ensures we can understand and work to align our salaries with the market. This is especially important in high-demand fields like IT, finance, engineering, and even human resources where we directly compete with the private sector. Benchmarking information is a critical input to establishing our municipality’s compensation philosophy.

2. Promoting Internal Equity

Benchmarking also supports internal equity. It helps identify issues such as salary compression, gender pay gaps, and pay inconsistencies across the municipality. Addressing these concerns will enhance employee trust and morale and reduce legal risk.

3. Informing Budgeting and Workforce Planning

Conducting regular benchmarking allows us to anticipate market trends and budget accordingly. It provides a proactive approach to wage adjustments, helping avoid reactionary decisions that could create inequities or unwanted budget impact.

The Importance of Proactive Benefits Planning

While salary is key to total compensation, benefits often hold equal or greater value for our employees. Proactive benefits planning involves designing and updating offerings to meet employee needs while managing long-term costs.

1. Supporting Wellbeing and Retention

We know our workforce values benefits that support work-life balance, mental health, family care, and long-term financial security. Modernizing benefit plans to reflect evolving needs enhances employee satisfaction and retention.

2. Adding Value Without Increasing Base Pay

In our budget-restricted environments, increasing salaries may not be feasible. Strategic benefits—such as flexible schedules, wellness initiatives, employee assistance programs, or tuition reimbursement—can offer meaningful value without large expenditures. Benchmarking benefit offerings against peer organizations, including the private sector, helps ensure our package remains attractive.

3. Managing Long-Term Costs

A proactive approach helps ensure the sustainability of benefits programs. Regular audits of plans, pensions and policies can uncover savings opportunities and promote efficiency. Planning ahead reduces the risk of abrupt changes that can damage employee trust.

Best Practices to Consider

• Conduct Regular Reviews: Benchmark salaries and benefits every 1–2 years. Use reliable third-party data such as the Conference Board of Canada and survey peer municipalities.
• Engage Leadership and Stakeholders: Include your leadership team, Finance as well as employee benefits usage trends in considering your compensation strategy, workforce needs, and budget planning. Our Recruitment teams also have valuable information from candidates about the impression of our compensation and benefits offerings.
• Communicate Transparently with Staff: Explain how pay and benefits decisions are made. Clear communication builds trust and understanding.
• Tailor Benefits to Workforce Demographics: Align offerings with the needs of your specific workforce. For example, newer employees may value professional development, while seasoned employees may focus on retirement readiness.
• Monitor Legal and Policy Changes: Stay up to date on employment laws, OMERS rules, and government healthcare policies that could impact your approach.

Human Resources takes the lead in ensuring compensation is equitable, competitive, and aligned with organizational goals. Through salary benchmarking and proactive benefits planning, we can build a total compensation strategy that supports recruitment, retention, and employee satisfaction. These practices are no longer optional—they are essential tools for managing today’s workforce effectively and responsibly.

Written by: Lori Kelly, Director, OMHRA’s Board of Directors