Critical HR Ratio Explained: What is Compa-ratio, Range Penetration and more

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caripros-hr-an... This video explains multiple key HR ratios in one shot: what is compa-ratio, range penetration, position in range, range spread, market index and position to market, and how to calculate them:
Formula for calculation:
Compa-Ratio: Salary / Range Mid
Range Penetration = (Salary - Range Min)/(Range Max - Min)
Position in Range = Range Penetration
Range Spread = (Range Max - Min)/Range Min
Note: Range Max = Range Min * (1+ Range Spread)
Market Index = (if benchmark with P50) Salary / Market P50
Position to Market = Market Index
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[@junri-jo4hr]

Hi.. Thank you so much for this. Question though, this is more of compensation management. What are the strategies we can implement if, after compensation analysis, we've seen that there are overpaid employees?

[@mariajauslin1107]

Who defines the range salary and where could you take the values for each job grade from? Could you please give an example?

[@hbroumi]

Hi thanks for details. I saw some definition of compa ratio is the employee salary devided by market median. Example Kornferry. What is your feedback on this?

[@CariprosHRAnalytics]

hi good question. KornFerry is a credible source for sure, this definition could work as well, especially if your organization don't have any salary structure in place (eg small organization, no need for salary structure due to small numbers of jobs). For mid to large organizations, I will say salary structure midpoint is more prevalent than market median, because it may not be feasible to find market data for all jobs, or it's just simply not practical to benchmark every single employee with the market.

[@elisan320]

Excellent presentation. I really like the question Vasanth raised. I'm curious as to how this compensation ration works as well. Can you elaborate?

[@CariprosHRAnalytics]

I just replied to Vasanth. Hope it helps u too.

[@heraldrohan]

HI, why is the internal mid and market mid different in the examples. Usually i create internal ranges by using market mid.

[@CariprosHRAnalytics]

Sure, market mid is good to use, but it may cause issue when you have a large organization. Just think about all kinds of jobs you may have within the same job grade. They may pay differently in the market. It will be messy and hard to compare with market mid in this case. Hence as a substitute, you use an internal mid instead.

[@heraldrohan]

Thanks much. This helps a lot. I am able to manage probably because it is small organization.

[@vasanththukkaram7937]

Hi thanks for the detailed explanation

[@hrgeek5349]

Excellent We Need More of That ..

[@CariprosHRAnalytics]

Oh thank you! I will try 😄

[@vasanththukkaram7937]

I have question..what if an employee stay in same grade for more than four years how this compensation ratio works?? Still to consider mid salary range

[@CariprosHRAnalytics]

Hi Vasanth, it really depends. In some countries where the salary and grade progression can be slow (eg. 5+ years) and the inflation is low, most likely it's the same ratio. In some countries where employee usually moves fast on the job grades, salary increase is high and/or the inflation rate is high, I admit that the ratio may not make sense. I think in principle, there are 2 ways to solve it: first, you move your salary range fast as well to catch up with the employee salary/inflation change; second, you may create a asymmetrical salary range with longer runway on the high end, and this extra range is only reserved for specially cases.