Compa-Ratio

Compa-ratio is a formula HR professionals use to check whether employees are being paid fairly, comparing a company’s salary for a role against the market rate for a similarly positioned employee elsewhere. It’s sometimes called a compensation or comparison ratio, and the name itself is just short for “comparative ratio.”

How is it calculated?

Divide an employee’s current salary by the market rate set under the company’s pay policy.

Types of compa-ratio

Individual compa-ratio shows where one person’s pay sits relative to the policy reference point for their range, useful if you need to adjust someone’s pay up or down to bring it in line.

Group compa-ratio looks at the whole organization, or a specific population within it, comparing total actual pay against the total of job reference point rates. It’s a way to see how practice stacks up against policy at scale.

Average compa-ratio is different from the group version, even though it sounds similar. It’s the sum of each individual’s compa-ratio divided by the number of people, rather than being based on the relationship between total actual pay and total reference rates the way the group calculation is.