Sleet

Compa-Ratio: How to Check Whether Your Pay Is Competitive

Nihit Dobariya
Management
5 min read
Quick answer

Compa-ratio is an employee's pay divided by the midpoint of the pay range for their role. Someone on ₹7.2 lakh in a ₹6 to 10 lakh range (midpoint ₹8 lakh) has a compa-ratio of 0.90. Between 0.90 and 1.10 is typical, below 0.90 may signal a retention risk, and above 1.10 means paid above midpoint.

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Compa-ratio, short for comparative ratio, compares an employee's pay with the midpoint of the pay range for their role. It is a quick way to check whether someone is paid below, at or above the market reference for the job.

Key points covered in this guide: The formula, An example, How to read the number, Where HR uses it, Building the range, Limits of the metric, Good practice

The formula

Compa-ratio equals the employee's current pay divided by the midpoint of the salary range for that grade. Express it as a decimal or a percentage.

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Fair reviews need clear criteria that managers and employees both understand.

An example

If the range for a role is ₹6 lakh to ₹10 lakh, the midpoint is ₹8 lakh. An employee paid ₹7.2 lakh has a compa-ratio of 0.90, or 90 percent. Someone paid ₹8.8 lakh has 1.10, or 110 percent.

How to read the number

  • ✓Below 0.90: Paid well below midpoint. Check whether the person is new to the role or is underpaid and a retention risk.
  • ✓0.90 to 1.10: Typical band. Most experienced, fully proficient employees should sit here.
  • ✓Above 1.10: Paid above midpoint. This may reflect high performance, rare skills or a pay structure that has not kept up with the person's growth.
Two women engaging in a professional conversation over coffee and notes.
Fair reviews need clear criteria that managers and employees both understand.

Where HR uses it

  • ✓Setting increments during appraisals so that high performers with low compa-ratios catch up faster.
  • ✓Finding pay gaps between people doing the same job.
  • ✓Checking new hire offers against existing team members.
  • ✓Planning budgets for market corrections.

Building the range

Compa-ratio is only useful if the range is credible. Build ranges from salary surveys, market data and your own pay philosophy, and refresh them at least yearly. Use midpoints that reflect your target market percentile.

Limits of the metric

  • ✓It ignores the person's experience and performance unless you add context.
  • ✓Ranges that are too wide make the ratio less meaningful.
  • ✓It focuses on base pay and may miss variable pay or benefits.

Good practice

Review compa-ratio by gender, location and tenure to find unexplained patterns. If gaps appear, investigate the reasons before assuming anything.

A pay range is a promise of fairness only if you look at where people actually sit in it.

HR software can store ranges by grade and calculate compa-ratio for every employee automatically, which makes pay reviews faster and more consistent.

Nihit Dobariya

Written by

HR Manager, Airwix Technologies (Sleet)

Nihit Dobariya is the HR Manager at Airwix Technologies in Ahmedabad, where he runs HR and payroll for the team behind Sleet. He writes about payroll, PF and ESIC, professional tax, the labour codes and everyday HR practice for Indian employers, and checks each rule against the official notification before it is published.

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