What is Compa-ratio? – Meaning & definition

The compa-ratio is a metric used to assess fair employee compensation by comparing wages to market rates. It includes personal, group, and average compa-ratios, each offering unique insights into pay structures.

By Brad Nakase, Attorney

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Introduction

The metric or calculation that experts use to determine whether firms compensate their employees fairly is called the compa-ratio. It contrasts an employee’s pay from a particular employer with that of a worker in a comparable role from another. There are occasions where compa-ratio is also called comparison or compensation ratios. The abbreviation for Comparative-ratio is Compa-ratio.

How does one compute the compa-ratio?

A worker’s current wage will be divided by the present market rate—as determined by the business’s fair compensation policy—to get the compa-ratio.

Compa-Ratios types

1. Personal Compa-Ratio: Indicates how a person’s pay compares to the compensation policy point of reference for the entire range and may be used to adjust pay within the band if it is excessively low or high relative to the point of reference.

2. Group Compa-Ratio: For an organization as a whole or for a specific demographic group, the group compa-ratio measures the link between policy and practice. The true payment amount is calculated as the percentage of the total job base rates.

3. Average Compa-Ratio: It is calculated by dividing the total compa-ratio of all the people by the total number of persons. Consequently, it differs from a group comparison ratio that depends on the correlation between the totals of real rates of pay and the totals of work benchmarks of pay.

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