Compa-ratio

What is compa-ratio

A compa-ratio (short for comparative ratio) is a compensation metric used to compare an employee’s current pay to the midpoint (or market rate) of a defined pay range for their role. It is typically expressed as a percentage and helps organisations assess whether their compensation practices are competitive, equitable, and aligned with internal pay structures.

Compa-ratio formula

To calculate an employee's compa-ratio, use the below formula: 

Compa-ratio = (Employee Pay ÷ Midpoint of Pay Range) × 100

For example, if an employee earns $90,000 and the midpoint of their pay range is $100,000:

Compa-ratio = (90,000 ÷ 100,000) × 100 = 90%

This means the employee is earning 90% of the midpoint, indicating they may be slightly under the market rate for their role.

Why compa-ratio matters

• Equity and fairness: A compa-ratio close to 100% means an employee is paid exactly at the market midpoint. A high compa-ratio indicates fair compensation for a person’s role and experience.
  
  
• Pay structure analysis: HR teams and compensation managers use compa-ratios to identify outliers for both underpaid and overpaid employees. Companies can adjust compensation policies accordingly.
  
  
• Benchmarking and budgeting: Compa-ratios help companies allocate pay budgets, perform internal equity reviews, and stay competitive in their industry.
  
  

Types of compa-ratios

• Individual compa-ratio: Compares one employee’s pay to the midpoint of their specific job range.
  
  
• Group or department compa-ratio: Averages the compa-ratios across teams or departments to identify pay gaps or inequities.
  
  
• Company-wide compa-ratio: Helps organisations evaluate their overall compensation strategy and alignment with the market.
  
  

What is a good compa-ratio?

• 80%–90%: Often used for new hires or employees developing in their role
  
  
• 90%–110%: Considered within a competitive and equitable range
  
  
• 110%+: May indicate above-market pay, often reserved for top performers or highly tenured employees
  
  

Compa-ratio vs. market ratio

While compa-ratio compares pay to a defined pay range midpoint, a market ratio compares pay directly to external market data or benchmarks. Both are useful for compensation planning, but compa-ratio is more focused on internal pay band alignment.

How Remote can help 

Remote helps you track, analyse, and optimise compa-ratios at scale to ensure pay transparency, internal equity, and strategic growth. 

For even more informed decisions, use Remote’s Pay Explorer to access real-time, location-based compensation data and set competitive, equitable pay ranges anywhere in the world.