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Ann,

Those additional uses for the ratio are ones we are likely to overlook. Thanks for pointing them out.

Frank

Thanks for the comment, Frank. I am probably overly fond of the humble compa-ratio, but I think it is a quite simple, flexible and indispensable pay management tool.

I think the compa-ratio is good, not because it gives you alot of information, but because is raises a ton of questions, to which the answers may be good or not so good. But it is a very useful tool.

Ann,

Good information. I've worked with Compa-ratios in the past and they seemed very useful. It is amazing how not that many people I talk to in HR utilize the Compa-ratio any more. It seems like too good of a tool to not use in your organization.

We go one step further. We use "quartiles" for our grades and determine a Merit Increase Matrix based on: 1) the average category scoring (between 1 and 5) and 2) which quartile you are in within your pay grade. Those in the 4th quartile would be similar to those with Compa-ratios of 120% and vice-versa.

Whichever methodology you use, it is important to utilize a pay process that does not discriminate in its overall function and provides a way to distinguish between your lower paid employees and your higher paid employees (whether in the same pay grade or not).

Thanks for keeping us informed. I was starting to think that the Compa-ratio was heading for extinction.

Michael:

I'm with you - I think compa-ratios help us raise important questions about our pay practices. That alone makes the statistic a useful tool.

Alan:

Thanks for your comment. I also run into a lot of HR professionals who don't know or use Compa-ratios, but I think they're still used by compensation professionals regularly. If not, hopefully we will resurrect the practice!
Some organizations even define their range quartiles (or quintiles or tri-tiles or whatever) using compa-ratios.

Thank you so much this was a realy nicely put explaination of the compa ratio.

Hi,
At work we use SAP Compensation system which uses compa-ratio, but management uses percentile. As an analyst I always have a problem with translating percentile to compa-ratio. Do you have a formula for this?
We are using a 75% spread salary scale (from min to max).
Lupe

Hi,

Faced similar problem as described by Lupe. I am comfortable with compa-ratio but not with converting the same to quartile or vice versa. Can anyone suggest a article/post/reading material which can be helpful in studying this??

Sovan

to Lupe and Sovan:

There are no exact formula for converting percentiles (like quartiles) to compa-ratios for statistical data.
Generally formula depends on statistical distribution of data.

If your data would be linear-distributed, the formula would be

"percentile"="compa-ratio"/2

(in fact data usually is not linear-distributed.
So this formula may be a very rough approximation)

taking this in mind:
'first' or 'lower' quartile (25% percentile) may play the same role as 50% compa-ratio
median (50% percentile) may play the same role as 100% compa-ratio
'third' or 'higher' quartile (75% percentile) may play the same role as 150% compa-ratio

Thanks, Ilya!

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About The Author

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    Compensation consultant Ann Bares is the Managing Partner of Altura Consulting Group. Ann has more than 20 years of experience consulting with organizations in the areas of compensation and performance management.

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