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Example of ratio measurements
You have three departments, each of which has budgeted the following average salary increases for the coming year:
| Department A | 7% raise for | 2 Employees |
| Department B | 9% raise for | 3 Employees |
| Department C | 11% raise for | 95 Employees |
What is the overall budgeted salary increase for the coming year? All individuals are receiving $30,000 per year.
| Department A | 7% | 2 employees | $4,200 increase |
| Department B | 9% | 3 employees | $8,100 increase |
| Department C | 11% | 95 employees | $313,500 increase |
| ALL | 27% | 100 employees | $325,800 increase |
Overall increase of salary budget = $325,800 / (100 x 30,000) = 10.86%
NOT
27 / 3 = 9%
This example is designed to illustrate a common error in Human Resources administration — addition and division of ratios. "Averaging averages" rarely works.
As shown above, 9% is not the overall increase of the salary budget. The actual amount is obtained by dividing the amount of raises given by the current salary budget. You must add the values of the variables (increases) for all 100 observed events and then divide that correctly by the initial total value of the number of observations (the employees' salaries: $30,000 x 100).
Memory Jogger
The total salary increase for the 5 teams in your department are below:
Team A - 5.0% raise for 2 employees total $4,500
Team B - 7.1% raise for 6 employees total $19,170
Team C - 6.3% raise for 6 employees total $17,010
Team D - 6.5% raise for 5 employees total $14,625
Team E - 6.2% raise for 4 employees total $11,160
The budget increase for the 23 employees totals $66,465
What is the percent overall increase of the salary budget? (Assume that all employees receive a $45,000 salary per year.)