What Is a Compa Ratio and How To Calculate It

Note: This article was originally published February 14, 2025.

Key Takeaways

• Compa ratio is a simple but powerful compensation metric that compares an employee’s salary to the midpoint of their salary range, helping HR teams assess pay positioning accurately.
• A good compa ratio typically falls between 80% and 120%, with 100% representing pay aligned to the midpoint for a fully qualified employee.
• Using compa ratio supports pay equity and reduces pay gaps, especially when comparing employee salaries within similar roles and salary ranges.
• Compa ratio should be reviewed regularly, alongside market rate data, performance, and skills, to ensure salaries remain competitive and fair.
• Organizations that use compa ratio in their compensation strategy make more consistent, data-driven pay decisions that help attract and retain talent.

Understanding whether employee salaries are fair and competitive starts with one essential compensation metric: the compa ratio. A compa ratio compares an employee’s salary to the midpoint of a defined salary range, showing how that pay aligns with the target rate for the role.

Modern market pricing tools help organizations define accurate salary ranges and calculate compa ratios at scale, ensuring pay decisions remain competitive and equitable.

For HR teams and compensation professionals, compa ratio provides a consistent way to evaluate salary positioning across similar roles. It supports better compensation decisions, stronger pay equity, and a clearer compensation strategy across your organization.

Understanding the Compa Ratio

The compa ratio (also called the comparative ratio or comparison ratio) measures how an employee’s actual salary compares to the salary midpoint for their position. Instead of comparing employee salaries directly to one another, compa ratio evaluates pay against a defined salary range tied to the role.

This approach allows compensation professionals to assess pay fairly across similar positions without losing sight of market rate benchmarks or internal pay structure.

How to Calculate Compa Ratio Step by Step

To calculate compa ratio accurately, follow these steps:

1. Identify the employee’s current salary
   
   
2. Confirm the defined salary range for the role
   
   
3. Find the midpoint of the salary range
   
   
4. Divide the salary to the midpoint
   
   
5. Interpret the result as a percentage
   
   

Or, put another way: Compa ratio = Employee’s salary ÷ Salary midpoint

Use this formula consistently across roles to ensure accurate compa ratio calculations.

Example: 

• Employee’s annual salary: $72,000
• Salary midpoint: $75,000

$72,000 ÷ $75,000 = 0.96 (or 96%)

This means the employee’s pay sits slightly below the midpoint of the salary range.

Compensation teams often calculate compa ratio at both the individual level and in aggregate to evaluate employee compensation across departments.

What Is a Good Compa Ratio?

A good compa ratio depends on skills and experience, performance, and market conditions. Most organizations consider the following ranges healthy:

• Below 80%: Likely underpaid, potential pay gap
• 80–90%: Common for a new hire or developing employee with room to grow
• 90–100%: Competitive pay for solid performance
• 100–110%: Strong contributor or specialized skills
• Above 110%: Higher ratio that requires justification

A compa ratio of 100% means the employee earns exactly at the midpoint of the salary range. A compa ratio below 100% indicates pay below target.

Salary, Midpoint, and Market Rate Alignment

The midpoint of the salary range should reflect the market rate for a fully competent employee in that role. If salary ranges fall out of sync with market rate or median salary data, compa ratio results become misleading.

Building compensation bands using real-time market data ensures compa ratio remains a reliable compensation metric for evaluating employee pay.

Regularly reviewing salary midpoint values ensures compa ratio remains a reliable compensation metric for evaluating employee pay.

Using Compa Ratio in Your Compensation Strategy

Compensation leaders use compa ratio to support consistent pay decisions and long-term planning to:

• Guide merit increases
• Standardize offers for similar roles
• Evaluate competitive salary positioning
• Maintain pay equity in an organization
• Support transparent pay policies

When you use compa ratio, compensation decisions are easier to explain and defend.

Group Compa Ratio and Organization-Wide Analysis

Beyond individual reviews, compensation and HR teams often calculate group compa ratio to assess pay trends across teams, job families, or the entire company.

A group compa ratio compares total employee salaries to total midpoints, helping leaders understand whether compensation is trending above or below target across your organization.

This insight is especially useful during merit cycles and compensation planning.

Compa Ratio and Pay Equity

Compa ratio plays a key role in supporting equal pay protection and reducing the pay gap. By comparing salary positioning within the salary range for similar positions, HR teams can identify disparities more clearly than by reviewing raw salaries alone.

If employees in similar roles consistently show lower compa ratios, this may signal inequitable pay practices that need correction.

How Compa Ratio Supports Better Compensation Decisions

Using compa ratio allows HR professionals to make informed, consistent compensation decisions based on data rather than perception.

It helps ensure:

• Fair employee compensation
• Alignment with compensation philosophy
• Competitive compensation for top talent
• Clear justification for raises and promotions

When compa ratio is embedded into the compensation plan, salary adjustments become more predictable and defensible.

Best Practices for Using Compa Ratio Effectively

1. Maintain a Defined Salary Range

Every role should have a defined salary range with a clear minimum, midpoint, and maximum. Without a reliable salary range, compa ratio loses meaning and can lead to inconsistent compensation decisions. Compensation teams should review salary ranges regularly to ensure they align with the market rate and current business needs.

A well-maintained salary range supports a healthy pay structure and ensures employee salaries remain competitive over time.

2. Review Compa Ratio Regularly

Compa ratio is not a one-time calculation. It’s important to calculate compa ratio during hiring, promotions, and annual compensation reviews. Market conditions change, and employee performance evolves, which can quickly shift where someone falls within the salary range.

Regular reviews help compensation professionals spot risks early, especially when employees with a compa ratio below 100% stay there too long.

3. Balance Internal and External Equity

A strong compensation strategy balances internal fairness with external competitiveness. Paying strictly to market can disrupt internal equity, while ignoring market rate data risks losing top talent.

Compa ratio helps HR teams balance both by showing how employee compensation compares within the salary range and against positions at other companies.

4. Use Compa Ratio Alongside Performance

While compa ratio is a powerful compensation metric, it should never be used alone. Skills and experience, performance, and business impact must always be part of the conversation.

A higher ratio may be appropriate for high-impact contributors, while lower ratios may reflect developing employees with growth potential.

Internal Analysis of Compa Ratios

Analyzing compa ratios within your organization can be a valuable exercise for compensation professionals, as it can help you identify areas where your compensation strategy may be out of line with the market. 

To explore this concept, we examined compa ratios for new hires compared to existing employees, with new hires defined as employees who started in their role in the last 12 months. The dataset includes 15k new hires and 51k existing employees. The box and whiskers show the 10th percentile to the 90th percentile, with the median compa ratio highlighted in the white box. 

New Hires Tend to Have Higher Compa Ratios Than Existing Employees

Next, we looked one level deeper and analyzed job families within R&D to explore variations by role. This dataset includes 2.4k new hires and 7.4 existing employees, all at the P3 level.

Companies Tend to Hire AI/ML & Data Science Employees at High Compa Ratios

New Hires Have Higher Compa Ratios

The data shows that the median compa ratios for senior roles (P4-P6) are above 100% (1.0 ), and that compa ratios for new hires are higher than those for existing employees. For many compensation professionals, this likely aligns with what you would expect to see—especially in tech. 

One explanation is that when the market moves quickly, employers may give more competitive offers to new hires to account for demand in the market. New hires also tend to negotiate in the offer stage, which can increase their pay levels compared with a more tenured existing employee who has stayed with the company and received smaller, incremental pay increases over time.

When we dig into the R&D findings, we see that AI/ML and Data Science roles are likely to be hired at compa ratios greater than 100% (1.0). The median compa ratio is 1.05 for new hires in AI/ML, and 0.97 for existing employees. This can indicate a “hot job” in the market, and given the extremely competitive market for AI/ML talent, it’s likely that companies need to extend offers at a premium to attract these candidates.

Using Compa Ratio to Build Fair, Competitive Compensation

Compa ratio remains one of the most effective tools for evaluating salary positioning. By comparing employee’s pay to the midpoint of the salary range, HR teams gain a clear view of compensation fairness across similar roles.

When used consistently, compa ratio supports pay equity, strengthens compensation strategy, and improves transparency around pay decisions. It helps organizations manage employee salaries more confidently while staying aligned with market rate expectations. compa ratio is not just a number. It’s a foundation for building a compensation plan that supports growth, fairness, and long-term success.

Ready to streamline compa ratio management? Pave's compensation planning software automates calculations, flags pay equity gaps, and integrates real-time market data, so your team can make confident pay decisions during merit cycles and compensation reviews.

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Frequently Asked Questions (FAQs)

What is a good compa ratio?

A good compa ratio typically falls between 80% and 120%. Around 100% represents pay at the midpoint of the salary range and is often the target for fully qualified employees.

What does a 95% compa ratio mean?

A 95% compa ratio means the employee’s salary is 5% below the midpoint. This is common for employees who are still developing skills or gaining experience in their role.

What does a compa ratio of 0.75 indicate?

A compa ratio of 0.75 means the employee earns 25% below the midpoint of the salary range. This can signal underpayment and potential retention risk if not addressed.

How does compa ratio support pay equity?

compa ratio helps identify pay gaps by comparing employee salaries within the same role and salary range. This makes inequities easier to detect and correct.

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