Compa-Ratio Calculator

What is a compa-ratio and how is it calculated?

A compa-ratio compares an employee's salary to the target pay for their job. It's calculated as: (Actual Salary ÷ Range Midpoint) × 100. For example, if an employee earns $75,000 and the target is $80,000, their compa-ratio is 93.75%. A ratio of 100% means the employee is paid exactly at the target.

How do you interpret compa-ratios?

Companies usually use these ranges to understand compa-ratios:

• <80%:Well below target—may mean the person is underpaid
• 80-90%:Below target—common for new employees or those still learning
• 90-110%:Target range—good pay that matches the market
• 110-120%:Above target—typical for very experienced employees
• >120%:Well above target—may need to review the pay range

Note: These numbers may be different depending on your company and industry.

What is range penetration and why is it important?

Range penetration shows where a salary falls between the minimum and maximum pay. It's calculated as: (Actual Salary − Range Min) ÷ (Range Max − Range Min) × 100. This is helpful because it gives you more information than just the midpoint. For example, 50% penetration means the salary is exactly halfway through the range. Quartiles (Q1-Q4) split the range into four equal parts, making it easier to talk about where someone falls in the range.

Why are compa-ratios important for HR and compensation professionals?

Compa-ratios help with several important tasks: Pay equity—making sure people in similar jobs get fair pay; Budget management—making smart decisions about raises and promotions; Market competitiveness—seeing how your pay compares to other companies; and Retention strategy—finding employees who might leave because of low pay. Checking compa-ratios regularly helps companies keep pay fair and competitive.

What should I do if an employee's compa-ratio is outside the normal range?

If an employee's compa-ratio is very low (<80%), check if they're being paid fairly for their job and experience. Look for pay fairness issues and decide when to give a raise. For high compa-ratios (>120%), make sure the pay range is still correct for the job. If the employee is paid above the range maximum, consider giving one-time bonuses instead of salary raises, or check if the job should be at a higher level. Always think about how long they've worked there, their performance, what other companies pay, and fairness across the team.

Should I use base salary or total cash compensation for compa-ratio calculations?

It depends on your company's approach and what you're looking at. Base salary compa-ratios don't include bonuses or commissions—use these for jobs where salary is the main pay. Total cash compa-ratios include yearly bonuses and work better for jobs with lots of bonus pay. When comparing to market data, make sure you're using the same types of pay in both numbers. Write down which method you're using so everyone does it the same way.