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Compa-ratio Report
A compa-ratio report records each employee by job title, compensation, as well as the pay grade and pay range. The report records the compa-ratio of each employee’s compensation as compared to the midpoint of the pay range. The midpoint of the range is typically the benchmark mean or median market rate for a grade. The report also identifies who is paid below the range minimum and over the range maximum. Through this company-wide report, you are able to determine the average compa-ratio of all employees combined, by grade, by department, etc. You can view the costs for adjustments to minimum as well as the number of employees over the maximum of the pay range. A compa-ratio report is similar to the example below:
Example:
| Employee | Grade | Title | Base Pay | Minimum | Midpoint | Maximum | Compa- Ratio | Under Min | Over Max |
|---|---|---|---|---|---|---|---|---|---|
| J Miller | 2 | Buyer | $50,000 | $44,000 | $55,000 | $66,000 | 91% | $0 | $0 |
A compa-ratio report summarizes the total costs for implementing a new salary structure. The compa-ratio report is also an important tool to determine overall market competitiveness as well as future competitiveness after adjustments to minimum, a merit budget, and an optional equity fund has been implemented.
Occasionally, a salary structure may need a modification when the compa-ratio report reveals an important issue prior to implementation. This may occur when a benchmark job has a recommended salary range which is too high or too low compared to the external marketplace.
The report is a critical tool in determining if the new pay structure is implementable or not and reveals the fit of the structure to the internal organization.
Compa-ratio = Employee Base Salary / Salary Range Midpoint x 100
Memory Jogger
Which of these statements is not true about the compa-ratio report?