Compa-Ratio - The calculation of the employee’s actual compensation divided by the market rate as defined by the company’s compensation philosophy.
A compa-ratio of 100% means the employee is aligned exactly at the market rate for their job. Compa-ratio is used to assess the employee’s compensation against the market. The competitive range is considered to be a compa-ratio between 85% to 115%.
A compa-ratio below 85% means the employee’s pay is below market. Generally, employees who are new to their role can be found at the low end of the range and the high performers with special skill sets at the high end of the range.
Compa-ratio, along with employees’ performance are common factors leaders use in proposing compensation increase recommendations.