Compa-Ratio & Position-in-Range

By Joy Lynn Hyer, SPHR, SHRM-SCP, CCP, Senior Compensation/Survey Analyst
Published October 29, 2024

As pay transparency laws are increasingly enacted at state and local levels, it’s essential that organizations clearly communicate their compensation philosophy and be more transparent about how they determine employee pay. There are two methods to assess how an employee’s pay rate aligns with the pay range for their position.

The first is Compa-Ratio. Compa-ratio is a basic compensation metric that shows an employee’s annual salary in relation to the midpoint of their pay range. It’s calculated by dividing the employee’s pay rate by the midpoint of their pay range: 

Compa-Ratio = (Employee Pay Rate / Pay Range Midpoint)

If an employee’s compa-ratio is exactly 1.0 or 100%, they’re being paid right at the midpoint of their pay range. Employees with a compa-ratio less than 100% are paid below their midpoint, and those with a compa-ratio greater than 100% are paid above their midpoint. For example:

Employee annual salary: $75,000 Pay range midpoint: $80,000

75,000 / 80,000 = .9375 (93.75%)

In this example, the employee earns 93.75% of the identified market-based midpoint for their job. This can also be expressed as the employee is .0625 or 6.25% below the midpoint of their pay range.

The second method is called Position-in-Range, also known as Range Penetration. This is another method to show how employees are paid within their pay range. Unlike compa-ratio, which focuses on the midpoint, Position-in-Range considers the full pay range.

While it isn’t complicated, this calculation requires more information to show where in the range an employee is being paid. An employee’s position-in-range is calculated using this formula:

Position-in-Range = (Employee’s Salary - Range Minimum) / (Range Maximum – Range Minimum)

For example:

Annual salary: $75,000 Pay range: $64,000 - $96,000
[(75,000 – 64,000) / (96,000 – 64,000)]
[(11,000) / (32,000)] = 34.38%

This employee is 34.38% into their pay range and still has room to grow. If this employee’s pay was $80,000 instead, their position in range would be 50% and they would be being paid right at the midpoint of their range.

Compensation professionals use both methods, depending on their personal preference. Either way, calculating and sharing this information is a good first step in being more transparent with your pay practices.