Compa-ratio and range penetration

Two numbers, two different questions

A pay range has three control points: a minimum at the bottom, a midpoint in the middle, and a maximum at the top. The midpoint is the one that matters most, because it is set to the market rate for someone doing the whole job well. Two metrics tell you where a given salary sits inside that band, and they get used interchangeably even though they are not measuring the same thing. Compa-ratio measures the salary against the midpoint alone. Range penetration measures how far the salary has traveled from the floor toward the ceiling. One is anchored to a single point; the other depends on the whole width of the band. Read either one by itself and you see half the picture.

Compa-ratio cares only about point 2, the midpoint. Range penetration cares about the distance between points 1 and 3, the floor and the ceiling. That single difference is why the same salary can land in two very different places depending on which number you read.

Compa-ratio: pay against the midpoint

Compa-ratio is the relationship of a person’s base pay to the market, expressed against the midpoint of their range. The formula is plain: compa-ratio = base salary / range midpoint. A result of 1.00, or 100 percent, means the salary lands exactly on the midpoint. A 0.90 means the person is paid 10 percent below the midpoint; a 1.10 means 10 percent above. Use base salary, not total cash, unless your structure is deliberately built on total compensation, because mixing a bonus into one side and not the other makes the ratio meaningless.

WorldatWork, the association of compensation professionals and the standard reference for these terms, points to a common working band of roughly 0.80 to 1.20. Where a person lands inside it is supposed to mean something: someone new to the role or still building proficiency belongs lower, while a seasoned, fully proficient performer sits near or above the midpoint. You can also read a whole group at once. The group compa-ratio is the sum of everyone’s salaries divided by the sum of their midpoints, and it tells you whether a team or a grade has drifted below market as a unit, which is a structural problem to fix in the ranges rather than one person to adjust.

What compa-ratio is good for: it centers on the market rate, so it is the cleaner lens for comparing pay across different jobs and grades and for pay-equity reviews, where the question is whether people are paid fairly against the market for their work. What it cannot tell you: how much room is left before the ceiling, because it never looks at the floor or the maximum. The four zones below are how the single number usually gets read, as guides and not hard rules.

Range penetration: how far up the band

Range penetration, also called position-in-range, measures how far a salary has climbed from the bottom of the band to the top. The formula is range penetration = (salary - minimum) / (maximum - minimum), shown as a percent. A salary sitting on the minimum reads 0 percent, one on the maximum reads 100 percent, and one halfway between the floor and ceiling reads 50 percent. Because most ranges are built with the midpoint as the arithmetic middle of the minimum and maximum, a salary at the midpoint reads a 1.00 compa-ratio and 50 percent penetration at the same time.

What range penetration is good for: it shows how much room is left to give base increases before the salary hits the ceiling, which is the one thing compa-ratio cannot tell you. That makes it useful for managing progression and for deciding where new hires and seasoned performers should sit inside a band. What it cannot tell you: anything about the market. A salary can be deep into a generous band and still trail the market, or low in a tight band and still be competitive, depending on where the midpoint falls. Penetration only reads cleanly inside one band.

Inside a single band, the two numbers move together. Take a range that runs from a $64,000 minimum to a $96,000 maximum, a midpoint of $80,000 and a 50 percent spread. Three salaries, each shown with its compa-ratio and then its range penetration:

The same salary, two readings

Here is the part that trips people up. Take one person paid $74,000, sitting in a band whose midpoint is $80,000. Now look at that same salary in two bands of different width. In a narrow band that runs $70,000 to $90,000, and in a wide band that runs $60,000 to $100,000. The midpoint is $80,000 in both, so the compa-ratio is identical, but the range penetration is not.

The compa-ratio is 92.5 percent in both, because it only measures the gap to the $80,000 midpoint, and that midpoint did not move. The range penetration jumped from 20 to 35 percent because the floor dropped from $70,000 to $60,000. Same person, same pay, same distance below the market midpoint, and yet one number says "barely into the band" while the other says "a third of the way up." That is the whole reason to read both. Compa-ratio answers whether the pay is at market; range penetration answers how much room is left before the top. A wide band can make a below-market salary look comfortable on penetration alone, and a narrow band can make a fair salary look stuck. Neither number is wrong. They are answering different questions, and you need both answers.

Why the numbers drift even when pay holds

Neither ratio is fixed, because the band moves underneath it. Every year, compensation teams age the structure, nudging the minimum, midpoint, and maximum upward to keep them aligned to the market, and they fund a merit budget, the pool that pays for individual base increases. The two are separate decisions, and the merit budget is the smaller, more closely watched of the two.

For 2026, the merit increase budget is running at about 3.2 percent of payroll, according to Mercer’s most recent US compensation planning survey. Total salary increase budgets, which add promotions, market adjustments, and equity corrections on top of merit, sit around 3.5 percent across the major surveys, with WorldatWork’s survey a touch higher near 3.6 percent. This is the third straight year that budgets have settled into the mid-3 percent range, after the sharper increases of 2021 to 2023. Structure movement, the separate adjustment to the range control points themselves, is set on its own and is often smaller than the merit pool.

Here is why that matters for the two numbers. If the structure moves up and a person’s raise does not keep pace, their compa-ratio drifts down even though their pay went up, the slow slide comp teams call range slippage. If raises outrun the structure, compa-ratios climb and more people press against the ceiling. So any compa-ratio or penetration figure is a snapshot against this year’s band. Reading last year’s number against this year’s structure is comparing two different rulers. Refresh the ranges first, then recompute.

Four ways these numbers mislead

• Reading one number and calling it the answer.Compa-ratio without penetration hides how little room is left before the ceiling. Penetration without compa-ratio hides whether the band itself is set to market. The two are a pair, and a salary that looks fine on one can be a problem on the other.
• Comparing penetration across different bands.A 40 percent penetration in a tight band and a 40 percent in a wide band are not the same dollars or the same market position. Penetration only compares cleanly inside one range. To compare across jobs and grades, use compa-ratio.
• Mixing base pay and total cash.Compa-ratio is a base-pay-to-midpoint measure unless your structure is built on total cash. Fold a bonus into one side and not the other and the ratio means nothing. Pick one definition and hold it across every comparison.
• Pushing everyone to the midpoint.A midpoint is the target for a fully proficient performer, not a floor everyone deserves. New and developing people belong below it. Treating 1.00 as the goal for all inflates payroll and erases the room the band was built to give as people grow.

Where these figures come from

Tools that use these numbers

Common questions