How to Calculate a Salary Comp Ratio
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The salary compa-ratio is a formula that you can use to compare a salary to what other companies or organizations are paying for a similar organization. Calculating it is a simple math problem that gives you a percentage comparison so that you can see, at a glance where you sit. Calculating this ratio gives you ammunition for a compensation discussion, whether you're trying to control costs and keep your employees' salaries commensurate with the market, or convince your employer to increase yours.
Research what the pay range is in the market for a position that is comparable to yours. Information available through the U.S. Bureau of Labor Statistics (bls.gov) and private salary survey sites can be helpful. When doing your research, try to narrow it down to positions that are truly comparable. For example, if you're a pediatrician in Peoria, comparing yourself to all doctors all across the country won't give you a meaningful compa-ratio.
Find the midpoint or average of the market pay range for your position.
Divide the pay range midpoint into your salary. For example, if you make $45,000 per year and the midpoint is $46,500, you divide 45,000 by 46,500, giving you a result of 96.8 Therefore, you would have a compa-ratio of 96.8 percent. If your compa-ratio is above 100 percent, your pay is above market and, if it's below, it's below market.
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.