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Annual Market Analysis and Salary Planning

What is annual market analysis and salary planning?

It is a series of activities under taken each year, usually 3-6 months prior to annual salary increases/annual increment, which include:

  • participation in annual salary increase surveys for each country
  • market benchmarking to determine market competitiveness on salaries, total fixed pay (i.e., gross salary, including allowances), total cash compensation (including variable bonus/performance based incentives), and total compensation including long-term incentives or benefits as needed
  • Identification of market gaps by overall location, by job category, key individuals, etc.
  • Prepare salary budget recommendation for each location: merit budget, other (promotions or equity adjustments), total
  • Development of salary ranges for all locations–by grade or by function/grade
  • Merit matrix or salary increase guideline (SIG) development and costing using previous year performance ratings
  • Update of merit matrix based on approved performance ratings for the year just ended, and final costing/refinement
  • Identify highest priority employees for pay increases: high performers, high potentials with low compa-ratio, etc.
  • Develop policies, process, roles and tools for salary review
  • Prepare recommendation on budgets, guidelines, catch-up/equity budgets and other details for CEO/MD approval

Market AnalysisWhy is this Important?

Every organisation needs to confirm each year that their salaries–the largest fixed cost for most employers–is market competitive. Paying too much and you are driving up fixed cost with diminishing return in terms of attraction. Over paying versus the market will also tend to retain talent more, so you need to ensure the right individuals are being retained through high salaries. Underpaying versus the market will puts both talent attraction AND retention at risk. Lagging the market by 1% or even 5% will not trigger an exodus, but a market gap of around 8% or more will put a lot of pressure on bonuses and other forms of rewards.

A properly conducted market analysis will show where additional salary increases may be needed, AND where no increases are needed. It not only helps you control overall cost, but helps you optimise your salary spend, focusing increases where most needed, such as high

When does it occur?

Calendar year-based companies that make salary adjustments effective in the 1st Quarter (January or March or 1st April) will generally conduct the above analysis from August through October, with range and SIG/matrix development occurring December/January.

Why outsource annual market analysis and salary planning?

The above process can be enormously time-consuming, highly complex, highly sensitive and subject to many internal and external influences. Organisations use consultants due to one (or more) of three reasons: 1) lack of expertise, 2) lack of resources, 3) lack of credibility.

Freelance Total Rewards can conduct this analysis for your organisation, using the same methods and tools used by the world’s most admired companies. We work closely with you and your team to maximise internal credibility and to optimise resources, as there are several competing priorities for C&B staff at year end. (See here for more on year-end priorities.)

If you have a staff of 500 in Singapore, your annual salary spend is likely to range from $20-50 million. The value of knowing how competitive your compensation levels are far outweighs the cost of the analysis.


Contact Tom Farmer at Freelance Total Rewards for more details and for a fee estimate based on your needs.



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