Compa-ratio
Employer Responsibility: What Businesses Need to Know

Compa-ratio

Compa-ratio (comparison ratio) is a compensation metric that compares the salary an employee is paid to the midpoint of the salary range for their position or similar positions at other companies. Compa-ratios reveal how far an employee’s pay is from the market midpoint. If an employee has a compa-ratio of 100 percent, they would be considered right “at market.”

Compa-ratios help employers determine if they are appropriately compensating their employees. If employee compensation is too little, an organization risks losing high-quality employees and attracting low-quality talent. But if they pay too high, they’re potentially mis-managing resources and hurting their bottom line.

Finding an acceptable compa-ratio depends on a combination of the position, budget and other employee benefits offered. A compa-ratio below 100 percent can be counterbalanced with benefits such as top-notch health insurance or equity options.

To do a compa-ratio calculation, divide an employee’s salary by the pay range midpoint.

For more on establishing salary ranges, check out this article.  

Or test your knowledge on compensation trends by taking our interactive quiz.

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