Compa-Ratio is the metric or formula used by professionals to analyze whether employers are paying their employees appropriately. It compares the salary paid to an employee in a company with another company’s salary of a similarly positioned employee. Compa-ratio is at times also referred to as compensation or comparison ratios. Compa-ratio is a short form of Comparative-ratio.
How is Compa-Ratio calculated?
To calculate Compa-ratio, an employee’s current salary is divided by the current market rate as defined by the company’s competitive pay policy.
Types of Compa-Ratios
- Individual Compa-Ratio: Describes an individual’s pay position against the pay policy reference point for the range and can be used to reposition an individual’s pay in the range if it is too high or low a reference point.
- Group Compa-Ratio: The group compa-ratio quantifies the relationship between practice and policy for the whole organization or a defined population group. It is a calculation of the sum of actual payment as a percentage of the sum of job reference point rates.
- Average Compa-Ratio: The average compa-ratio is the sum of each individual’s compa-ratio divided by the number of individuals. It is therefore not the same as a group compa-ratio which is based on the relationship between the sums of actual rates of pay and the sums of job reference points of pay.