Compa Ratio | Meaning and Definition

What is Compa-ratio?

The compa-ratio or the comparison ratio is a pay statistic that compares an employee’s income to the midpoint of the wage range for their position or similar jobs at other organizations. Compa-ratios show how much an employee’s salary deviates from the market average. When an employee’s compa-ratio is 100 percent, they are deemed to be at the market level.

Compa-ratios assist companies in determining if they are paying their employees fairly. A business risks losing high-quality personnel and recruiting low-quality talent if employee remuneration is inadequate. However, if they pay too much, they risk mismanaging their assets and damaging themselves in the long run.

The job, funding, and other employee perks offered all play a role in determining an appropriate compa-ratio.

Benefits such as leading medical insurance or stock options can offset a compa-ratio that stands below 100 percent.

Divide an employee’s salary by the pay range midpoint to calculate the compa-ratio.