Compa-ratio earns its keep as a diagnostic. Sorted by time in position, it exposes compression that averages hide.
Range endpoints from the midpoint
The case sets range endpoints by percent guidelines around the midpoint.
- Entry to mid-level professional and management: 30 percent below and above. Midpoint $88,000 gives 0.70 x 88,000 = $61,600 minimum and 1.30 x 88,000 = $114,400 maximum.
- Clerical and office: 10 percent guideline, a different number for a different grade family.
Traps: dividing by 1.30 to get the minimum, and applying 1.40 to the maximum.
The compression diagnostic
SHRM advises reviewing compa-ratios within each salary grade or band by employees' time in position. The warning sign is shorter-service employees in the third or fourth quartile while longer-service employees sit in the first or second.
Worked case: a 15-year incumbent earns $68,000 against a $68,000 midpoint, compa-ratio 1.00; a new hire in the same job earns $66,500, compa-ratio 66,500 / 68,000 = 0.98. The differential is (68,000 - 66,500) / 66,500 = 2.3 percent for 15 years of added experience — the classic compression signature, not healthy differentiation. The new hire is below the midpoint, so 1.02 is not an option.
Aggregate checks cannot find this. Average salary against market median, a high-to-low pay-dispersion ratio, and merit budget as a share of payroll are all blind to the tenure pattern inside a grade.
The judgment the keyed answers reward
Fix the cause with targeted money, not a uniform gesture.
- Present the compa-ratio-by-time-in-position analysis as evidence and target adjustments to the longer-service employees whose ratios sit lowest.
- A uniform across-the-board increase preserves the compressed relationship it is meant to fix.
- Widening the range spread changes the measuring stick, not pay relationships.
- Freezing newer hires leaves compression in place while the freeze runs.
Where midpoints come from
The midpoint of each established grade is the pay rate produced by the pay policy line for that grade — not incumbent averages, not the lowest market rate, and not the market line before a lead, lag or meet adjustment. A pay line always runs through the midpoint.