Range penetration is a paymetric that compares the salary an employee is paid to the total pay range for their position or similar positions within other companies. This pay comparison describes how far into the pay range the employee’s pay has progressed. Range penetration also helps identify opportunities to increase an employee’s pay.
Reviewing range penetration helps employers determine if their pay ranges are too wide or too narrow for the organization to comfortably support. Narrower ranges are better for lower-level positions where employees are starting their careers and are more likely to be promoted faster. Wider ranges help retain mid to late-career employees because they don’t have to forgo competitive pay increases as they continue to grow experience and expertise in their current positions.
Range penetration is calculated using the minimums and maximums of a salary range.
Below is the formula for calculating range penetration:
Range penetration = (salary – range minimum) ÷ (range maximum – range minimum)