How is a compa-ratio calculated?
What is a typical range for a compa-ratio?
Why is a compa-ratio important for compensation management?
Compa Ratio
A compa-ratio, also known as a comparative ratio, is a metric that compares an employee's current salary to the midpoint of their established salary range or pay grade.
How is a compa-ratio calculated?
The compa-ratio formula divides an employee's current salary by the midpoint of their salary range and then multiplies this number by 100 to get a percentage. For example, if an employee earns $60,000 and their salary range midpoint is $65,000, their compa-ratio is 92.3% ($60,000 Ă· $65,000 Ă— 100). A ratio of 100% means the employee earns the midpoint salary.
What is a typical range for a compa-ratio?
Most organizations target compa-ratios between 80% and 120% of the salary range midpoint. Ratios between 90% and 110% are seen as competitive compensation without overpaying. New employees can start at 80%-95% to allow room for growth, while experienced employees may reach 105%-120%.
Why is a compa-ratio important for compensation management?
Businesses use compa-ratios to evaluate pay competitiveness, identify compensation gaps, and ensure fair salary distribution across similar roles. Compensation management strategies use these ranges to make informed decisions about salary benchmarking, promotions, and budget allocation.
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