The usefulness of compa-ratios is to establish a link between the level of pay for an individual and their level of performance in the job. Naturally the better the performance the higher the compa-ratio can be expected to be.

The lines of best fit to an organisation's Base Salary and Total Remuneration data respectively are taken as indicative of their underlying pay policy. These lines can be termed the organisation's pay practice, and show how competent performance is valued for jobs of differing size.

A number of factors determine the remuneration for an individual however, and hence there is usually variation in an individual's remuneration from this practice line. The practice line charts given in the Contributor Report detailed above indicate graphically how individual remuneration varies from the practice line.

Factors which cause variation from the line for an individual are normally related to the individual's performance and commonly a displacement of up to 20% from the practice line is considered normal.

The measure of the displacement from the practice line is called the compa-ratio and is an index giving the relationship between the individual's actual salary and the salary that corresponds to that which would be paid for the same size job as dictated by the practice line.

The calculation is therefore as follows:

The following is an example of a Total Remuneration Compa-Ratio Analysis.

Move the mouse pointer over the display, and where the mouse pointer changes to a pointing finger, click on that area for an explanation.

As stated above, a commonly accepted range for compa-ratios is 80% to 120%.

Commonly the compa-ratio range of 80% to 120% is divided into five zones, eg. 80-87%, 88-95%, 96-103%, 104-111%, 112-120%.

Each one of these zones is associated with a pre-defined level of performance, with 100% representing fully competent performance in the job.

The five compa-ratio zones cited above range at the lowest level from new, inexperienced incumbents, or unsatisfactorily performing incumbents, through to the highest level reserved for those universally recognised as outstanding performers.

Compa-ratios should, therefore, serve as a measure of relative performance of individuals within an organisation.

Copyright(c) 2000 National Remuneration Centre.