Compa-Ratio and Range Penetration

What each measure tells you

A salary range has three reference points: the minimum, midpoint, and maximum. The minimum and maximum establish the boundaries, while the midpoint provides a reference for comparing salaries. Four parts of a salary range matter when reviewing pay:

1. Minimum: The lowest salary in the established range. Salary at the minimum has 0% range penetration.
2. Midpoint: The central reference point for the range, often established using market pay data. Salary at the midpoint has a compa-ratio of 1.00.
3. Maximum: The highest salary in the established range. Salary at the maximum has 100% range penetration.
4. Range spread: The difference between the minimum and maximum, expressed as a percentage of the minimum. Salary range spreads of approximately 30% to 60% are commonly referenced for professional roles, with wider ranges often used for senior positions.

Compa-ratio: salary relative to the midpoint

Compa-ratio compares an employee's base salary with the midpoint of their assigned salary range. The formula is compa-ratio = base salary ÷ range midpoint. For example, an employee earning $72,000 in a range with an $80,000 midpoint has a compa-ratio of 0.90. That means the salary is 90% of the midpoint, or 10% below it. An employee earning $88,000 against the same midpoint has a compa-ratio of 1.10, or 10% above it.

A commonly used reference range for compa-ratio is approximately 0.80 to 1.20. Experience, responsibilities, performance, and the organization's pay approach all help determine where an employee belongs in the range. Employees building proficiency may have salaries below the midpoint. Experienced employees may be positioned near or above it, depending on their skills, responsibilities, performance, and other compensation factors. You can also calculate compa-ratio for a department, job family, or grade. Group compa-ratio = Total employee base salaries ÷ Total corresponding range midpoints. The result shows how the group's combined base salary compares with its combined range midpoints. If a group's compa-ratio is lower than expected, examine employee experience, proficiency, recent hiring rates, and range design.

Compa-ratio helps you compare salary position across jobs and grades. Consider it alongside responsibilities, experience, performance, and other relevant factors when making pay decisions.

Below the midpoint Approximately 0.80 to 0.95

Pay is below the midpoint. Review the employee's experience, proficiency, performance, and progression in the role.

Around the midpoint Approximately 0.96 to 1.10

Pay is near or moderately above the midpoint. Review how experience, performance, responsibilities, and other compensation factors support that position.

Above the midpoint Approximately 1.11 to 1.20

Pay exceeds the midpoint. Check range penetration to understand how much room remains before the maximum.

Outside the commonly referenced range below 0.80 or above 1.20

Review the salary and assigned range alongside employee experience, market movement, range design, and other relevant compensation factors.

Range penetration: position within the range

Range penetration, sometimes called position-in-range, measures where salary falls between the minimum and maximum. The formula is range penetration = (salary minus range minimum) ÷ (range maximum minus range minimum) × 100. Salary at the minimum has 0% penetration. Salary halfway between the minimum and maximum has 50% penetration. Salary at the maximum has 100% penetration. When the midpoint is the arithmetic average of the minimum and maximum, an employee paid at the midpoint has both a 1.00 compa-ratio and 50% range penetration.

Range penetration helps you evaluate salary progression, hiring rates, and room for future base salary increases. For market competitiveness, compare the range midpoint with relevant market pay data.

Consider a salary range of $64,000 to $96,000, with an $80,000 midpoint and a 50% spread.

A wider or narrower salary range can change the penetration percentage, even when salary and the midpoint stay the same.

Why range width matters

Consider an employee earning $74,000 with an assigned range midpoint of $80,000. The compa-ratio is 0.925, or 92.5%. See how that salary fits into two ranges with the same midpoint.

20% range penetration

Narrow range: $70,000 to $90,000. Salary: $74,000. Compa-ratio: 92.5%. The salary is 20% of the way from the minimum to the maximum.

35% range penetration

Wide range: $60,000 to $100,000. Salary: $74,000. Compa-ratio: 92.5%. The salary is 35% of the way from the minimum to the maximum.

Both ranges produce the same compa-ratio because the salary and midpoint are identical. Range penetration differs because each range has a different minimum and maximum. Compare range widths when reviewing pay across jobs or grades.

How salary and range changes affect the numbers

A salary increase or range adjustment can change both measures. Employers may adjust salary ranges as market pay changes or their compensation strategy evolves. They may also provide merit increases, promotions, market adjustments, and other individual salary changes.

For 2026, Mercer reported planned US merit increase budgets of approximately 3.2% of payroll and total salary increase budgets of approximately 3.5%. WorldatWork reported 2026 salary increase budgets near 3.6%. WTW reported approximately 3.5%, with a later estimate near 3.4%. Together, these surveys place planned 2026 salary increase budgets in the mid-3% range. Salary structure adjustments are separate from merit increase budgets and may move at a different rate.

A range adjustment can change an employee's pay position even when their salary stays the same. If salary ranges increase faster than employee pay, compa-ratios decline even when employees receive increases. If employee pay grows faster than the ranges, compa-ratios rise and more employees may approach the range maximum. Range penetration also changes whenever salary, the minimum, or the maximum changes. After a salary or range change, recalculate both measures using the revised values.

Using both measures in pay decisions

• Look at both measures together when reviewing pay. Compa-ratio shows salary relative to the midpoint, while range penetration shows room within the range.
• Consider range design. The same range penetration percentage can represent different dollar amounts in different salary ranges. Account for range width when comparing employees.
• Use consistent pay definitions. For a base salary structure, use base salary consistently in both calculations and throughout your analysis.
• Use the midpoint as one reference when weighing experience, proficiency, performance, internal equity, and your compensation strategy.