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. 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.

1. The minimum. The floor of the band, the least the structure pays for the job. A salary here reads 0% range penetration. New hires and people still learning the role usually start in the lower part of the band.
2. The midpoint. The market target the range is built around, the going rate for a fully proficient performer. A salary here reads a 1.00 compa-ratio. This is the anchor everything else is measured against.
3. The maximum. The ceiling, the most the structure pays without a promotion or a deliberate exception. A salary here reads 100% range penetration. Pay at the top has little room left for base increases.
4. The spread. How wide the band is from floor to ceiling, commonly 30% to 60% of the minimum for professional roles, wider for senior ones. The wider the spread, the more distance opens up between the same two readings.

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%, means the salary lands exactly on the midpoint. A 0.90 means the person is paid 10% below the midpoint. A 1.10 means 10% above. Use base salary, not total cash, unless your structure is deliberately built on total compensation. 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. 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. It tells you whether a team or a grade has drifted below market as a unit. That is a structural problem to fix in the ranges, rather than one person to adjust.

Here is 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. It is also the cleaner lens 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.

New or still developing about 0.80 to 0.95

Early in the role and ramping toward full proficiency. Sitting below the midpoint is expected here, not a problem, and leaves room for merit increases as the person grows into the job.

At market, fully proficient about 0.96 to 1.10

Paid around the going rate for someone doing the whole job well. The center of the band, and where most steady, experienced performers should land.

Seasoned or near the top about 1.10 to 1.20

Deep tenure or scarce skills. There is little room left for base increases without a promotion or a structure adjustment, so growth often shifts to other rewards.

Outside the band below 0.80 or above 1.20

A flag to look into, not a verdict. Low can mean a retention risk or a lagging structure. High can mean a red-circled salary or pay that has outrun the range.

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%, one on the maximum reads 100%, and one halfway between the floor and ceiling reads 50%. Most ranges are built with the midpoint as the arithmetic middle of the minimum and maximum. So a salary at the midpoint reads a 1.00 compa-ratio and 50% penetration at the same time.

Here is what range penetration is good for. It shows how much room is left to give base increases before the salary hits the ceiling. That 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. It can be low in a tight band and still be competitive. It depends 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% spread. Three salaries, each shown with its compa-ratio and then its range penetration:

Salary in the $64,000 to $96,000 bandmidpoint $80,000Compa · Penetration $72,00010% below the midpoint, a quarter of the way up the band0.90 · 25% $80,000paid at the midpoint, the market target1.00 · 50% $88,00010% above the midpoint, three-quarters of the way up1.10 · 75% In this band the columns track each other: compa-ratio steps 0.90, 1.00, 1.10 while penetration steps 25, 50, 75%. The figures are exact for a $64,000 to $96,000 range. The catch is that the penetration column depends on where the floor and ceiling sit. Keep the salary and the midpoint the same but change the width of the band, and the two numbers come apart, which is the next section.

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.

20%Narrow band, $70,000 to $90,000Range penetration. Compa-ratio 92.5%. With the floor close to the pay, the same salary sits low in the band, with limited room shown before the ceiling. 35%Wide band, $60,000 to $100,000Range penetration. Compa-ratio still 92.5%. The lower floor pushes the same salary further up the range, even though nothing about the pay or the market changed.

The compa-ratio is 92.5% 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% because the floor dropped from $70,000 to $60,000. Same person, same pay, same distance below the market midpoint. 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. They also 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% of payroll, according to Mercer’s most recent US compensation planning survey. Total salary increase budgets add promotions, market adjustments, and equity corrections on top of merit. They sit around 3.5% across the major surveys, with WorldatWork’s survey a touch higher near 3.6%. This is the third straight year that budgets have settled into the mid-3% 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. Comp teams call that slow slide 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% penetration in a tight band and a 40% 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.

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