0%

What is a Compa-Ratio?

Compa-Ratio is an employee’s actual pay divided by the pay band's midpoint.

A compa-ratio of 100% means pay is exactly at the midpoint of a range.
The midpoint is defined based on the company's compensation philosophy.
The typical competitive range is 85%–115%.
- Below 85% = below the minimum of the range (common for new hires).
- Above 115% = above the maximum of the range (often high performers or niche skills).

Leaders use compa-ratio — along with performance — to guide pay decisions like salary increases.

Go Deeper: Understanding Compa-Ratio

What “Compa-ratio” Actually Means

It’s short for comparative ratio.
Formula: Employee’s actual pay ÷ Market reference pay (from your company’s pay philosophy).
The result is a percentage that shows where the employee sits relative to market.

Example

Suppose the market rate for a Software Engineer (according to your comp philosophy) is $100,000.
If the employee makes $90,000:
- Compa-ratio = 90,000 ÷ 100,000 = 90% → below market.
If they make $110,000:
- Compa-ratio = 110,000 ÷ 100,000 = 110% → above market.

Why It’s Useful

Fairness check: Are employees paid consistently against market benchmarks?
Decision-making: Helps managers decide salary increases, promotions, or adjustments.
Patterns: New hires or junior employees often fall at the low end (say, 85–90%), while experienced top performers might be at 110%+.

Competitive Range

Many companies consider 85%–115% as the “acceptable” zone.
- Below 85%: could be underpaying → retention risk.
- Above 115%: could signal overpayment or a role mis-leveled.

In short: compa-ratio is a quick, standardized way to see if someone is under, at, or above market pay, relative to how your company defines market.