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Introduction to Compensation Bench-marking
In the competitive business world, giving the right compensation is not only a benefit but also a business strategy. Compensation bench-marking refers to presenting the organization’s compensation structures, including wages, bonuses, and rewards, to those in the industry or the competitors. Whether you are a company in Saudi Arabia, the Gulf or the UK, you can be sure that if you learn to benchmark compensation properly, you can attract and hold the best talent, stimulate your employees and hence improve performance.
Importance of Bench-marking in Today’s Market
Companies worldwide and across different industries, such as oil and gas in Saudi Arabia, or construction in Dubai, or finance in London, know that they should implement a pay program that is comparative. What is the main point of the bench-marking?
Employee Keeping: Higher pay will make an employee more willing to continue working with their current company.
Staff Hiring: Being aware of what your market offers for the same category of jobs prevents both over- and under-payment.
Eliminating Salary Discrimination: Bench-marking the salaries of your company with those of other companies is a way not to disturb and have fair pay at the same time.
We can see that the introduction of various incentives that are adequate is what motivates the employees to go beyond their limits, thereby leading to increased work efficiency.
Short-Term Incentive Plans (STIP)
What is an STIP?
Short-term incentive plan (STIP), in which a company will reward its employees for meeting certain business goals within a little time, usually a financial year, is a payout plan. Generally, STIPs are structured as bonuses or profit-sharing.
These are commonly offered to:
- Mid-level managers
- Senior executives
- Department heads
Bench-marking Examples
When bench-marking STIPs in the Gulf or UK, companies usually look at
- Bonus as a % of Base Salary: For example, 10-30% of annual salary is common.
- Performance Metrics: Revenue growth, project completion, or department KPIs.
- Eligibility Criteria: Employees must meet certain thresholds (e.g., 90% of annual target).
Example:
A Saudi logistics company offers a 20% STIP to team leaders based on quarterly delivery KPIs. Competitor bench-marking shows similar roles in the UAE get 25–30%, prompting a review to stay competitive.
Long-Term Incentive Plans (LTIP)
Common Types
Long-term incentive plan (LTIP) are aimed at retaining and stimulating the top personnel of the company by linking their awards to the company’s long-term success. In these types of plans, the persons are held over several years in order to receive the benefits.
Popular LTIP Structures:
- Restricted Stock Units (RSUs)
- Stock Options
- Performance Shares
- Deferred Cash Bonuses
These are especially popular in:
- Publicly listed companies
- Startups preparing for IPO
- Large corporations in oil, finance, and tech
Market Standards
- Saudi Arabia/Gulf: Multinational companies often offer 3-year vesting periods with 20–40% of total compensation as LTIP.
- UK: FTSE 100 companies commonly offer LTIPs equal to 100–200% of base salary for C-suite roles.
Tip: Use industry-specific bench-marking platforms or consultancy firms that specialize in the Gulf and UK markets for accurate LTIP data.
Sales Incentive Plans
How They Differ
Sales Incentive Plans differ from STIPs or LTIPs by reason of the fact that they are directly connected to the performance of a single salesperson and are quite often commission-based.
These are used for:
- Sales Executives
- Business Development Officers
- Key Account Managers
Incentive types include
- Commission-based % of revenue or profit
- Tiered bonuses
- Quarterly sales contests or awards
Best Practices in Bench-marking
- Gulf Region: Most companies use a commission system of 5-10% for B2C and 2-5% for B2B transactions. On top of that, other incentives could be given during months like Ramadan.
- UK: Inside sales teams usually get a base salary + 5–8% commission; field sales roles can go up to 12–15%.
bench-marking Tips:
- Segment data by industry (retail, software, construction, etc.)
- Include both monetary and non-monetary rewards
- Ensure your targets are realistic yet challenging
Tools and Methods for Compensation Bench-marking
For companies to properly benchmark their compensation plans, such as STIPs, LTIPs, or Sales Incentives, they need to have a formalized process. These are the instruments and methods to be used.
1. Salary Bench-marking Tools
- Gulf Region: Tools like Gulf-talent, Mercer Middle East, and Bayt Salary Reports
- UK Market: Glassdoor, Pay-scale, and CIPD compensation reports
2. Compensation Surveys
Annual compensation surveys from firms like Aon Hewitt, Korn Ferry, or Willis Towers Watson provide reliable data segmented by role, industry, and geography.
3. Internal Data Analysis
Your HR analytic team should compare
- Employee performance vs. payouts
- Incentive cost vs. business results
- Attrition rates vs. compensation competitiveness
4. Hiring Benchmarks
Use real-time job market data to understand what competitors are offering. This is especially useful when hiring for niche roles.
5. Consulting Services
Consider working with compensation consultants experienced in your industry and region. They offer custom reports and market intelligence.
Final Thoughts: How to Stay Competitive
Be it a Saudi Arabian employer going international or a British company stepping into the Gulf, the relevance of competitive compensation bench-marking is definite. Find out the top strategies that will place you on the edge of the competition.
- Regularly update compensation data (at least annually)
- Segment incentives by role and performance levels
- Incorporate both fixed and variable pay for flexibility
- Customize by region, especially if you operate in multiple countries
- Use digital HR tools for real-time bench-marking insights
An effectively bench-marking-ed compensation strategy does not only make the staff more satisfied but also enhances the productivity and retention rate of good employees. When a company designs a result-driven STIP, a future-oriented LTIP, or a flexible Sales Incentive Plan, the process of bench-marking becomes the initial and key step of the recruitment of A-players. The sentence structure and
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FAQ’s
Q1. What is compensation bench-marking?
A: It is the process of comparing your company’s pay and incentive plans with market standards to ensure competitiveness and attract talent.
Q2. Why is STIP and LTIP bench-marking important for Gulf businesses?
A: These plans align employee rewards with company goals. Bench-marking ensures that your plans are competitive in the local and international market.
Q3. How do UK companies use sales incentive bench-marking?
A: UK firms use it to structure commissions, bonuses, and rewards based on competitor data, ensuring sales teams are motivated and fairly compensated.
Q4. How often should we update our compensation bench-marking?
A: At least once a year, or when entering a new market, hiring for critical roles, or changing business strategy.
Q5. Do you offer custom bench-marking solutions for Saudi or UAE companies?
A: Yes, we provide tailored STIP, LTIP, and sales incentive bench-marking for businesses in Saudi Arabia, the UAE, and across the Gulf region.
Need help with compensation bench-marking in the Gulf or UK?
Our team specializes in customized STIP, LTIP, and Sales Incentive strategy development. Contact us for a free consultation.
Connect with Rooted HR—Your Global HR Partner
At Rooted HR, we specialize in delivering strategic HR solutions and corporate training programs (حل لحلول الموارد البشرية وبرامج التدريب للشركات) across the UK, Saudi Arabia, Iraq, and the GCC region, including Oman, Qatar, Bahrain, and Kuwait. Our mission is to empower organizations by nurturing talent and fostering dynamic workplace cultures.
Phone: +44 7984 860230
Email: [email protected]
Website: www.rooted-hr.com
Address: 71-75 Shelton Street, Covet Garden, London, United Kingdom, WC2H 9JQ
Business Hours: Monday to Friday, 10:00 AM–6:00 PM (GMT)
