The calculation
Compa-ratio is an employee's pay divided by the midpoint of the pay range for their grade or role.
An employee paid 600,000 in a range whose midpoint is 750,000 has a compa-ratio of 0.80, or eighty per cent. One paid 900,000 against the same midpoint sits at 1.20.
Two choices have to be made before the number means anything.
- Which pay figure. Fixed pay is the usual and the most comparable. Using cost to company imports employer contributions and benefit valuations that differ between structures, and using total including variable mixes a certainty with a possibility.
- Which midpoint. The market midpoint from a survey, or the midpoint of your own designed range, and the two are not the same thing. Say which you are using, because a ratio against a market midpoint answers a competitiveness question while a ratio against your own range answers an internal consistency question.
Reading the number
| Ratio | Usual reading | Worth checking |
|---|---|---|
| Below 0.80 | Materially under the range | Whether the range or the grading is wrong, before assuming the pay is |
| 0.80 to 0.95 | New to the role, or developing | How long they have been there; two years at 0.85 is a different story |
| 0.95 to 1.05 | Fully performing, paid as intended | Nothing, usually |
| 1.05 to 1.20 | Experienced or high performing | Whether progression exists, since there is little room left |
| Above 1.20 | Above the range | Whether the role has grown beyond its grade, which a desk audit would establish |
The bands are conventions rather than rules. What matters is that the organisation states what it expects at each stage and applies it consistently, since the value of the measure is comparative.
A ratio above the range is not automatically a problem to correct. It often means the person is doing more than the grade describes, in which case the answer is regrading rather than freezing their pay until the range catches up.
Where it is genuinely useful
Individual compa-ratios are mildly interesting. Aggregated ones are where the measure earns its place.
- By team or manager. A manager whose people sit consistently below midpoint while a peer's sit above is making different decisions with the same budget, and that is visible nowhere else.
- By gender, or any other group. A persistent gap in average compa-ratio between groups doing similar work is the clearest internal signal of a pay equity problem, and it is more informative than average pay because it controls for grade.
- By tenure. Ratios that do not rise with tenure mean progression is not happening, and long-serving people below midpoint are usually the ones who joined at a low offer and never caught up.
- Against hiring. New joiners entering above the ratio of existing staff at the same grade is compression, and it is the most common cause of an unexpected resignation from someone who was not looking.
That last pattern is worth watching deliberately. Compression is created by paying the market rate to new hires while giving existing staff percentage increments, and it is invisible until someone finds out.
Where it misleads
- A stale range. If the midpoint was set three years ago and the market has moved, everyone will look well paid and none of them will be.
- An invented range. Ranges built backwards from current pay make every ratio approximately 1.0 and the measure meaningless.
- Wide grades. A grade spanning several genuinely different roles produces ratios that reflect which role someone does rather than how they are paid.
- Mixing pay definitions. Comparing one person's fixed pay ratio against another's cost to company ratio is a comparison of nothing.
- Geographic differences. A single national range across cities with different pay markets makes location the dominant variable in the ratio.
- Treating it as a performance measure. Compa-ratio reflects pay decisions, tenure and hiring history at least as much as it reflects contribution.
The underlying caution is that compa-ratio describes a structure. If the structure is wrong, the ratio faithfully reports a wrong thing, and the confidence a numeric measure carries makes that harder to notice than it should be.
What the Code on Wages, 2019 replaced
4 enactments stand repealed under s. 69, in force 21 November 2025 by S.O. 5322(E).
- Payment of Wages Act, 1936
- Minimum Wages Act, 1948
- Payment of Bonus Act, 1965
- Equal Remuneration Act, 1976
Across all four labour Codes, 29 enactments stand repealed. A policy or handbook that still cites one of them by name is describing rules that no longer exist.
Statutory reference
- Act
- Code on Wages, 2019
- Section
- Code on Wages, 2019: the prohibition on discrimination in wages on the ground of gender in respect of the same work or work of a similar nature, and on discrimination in recruitment for such work. In force 21 November 2025, repealing the Equal Remuneration Act, 1976 among others. Compa-ratio is a compensation management measure with no statutory basis, but aggregated compa-ratio by gender within a grade is directly relevant evidence on the question that provision raises
- Key limits
- No statute requires or defines compa-ratio. Its statutory relevance is evidential: a persistent difference in average compa-ratio between groups doing the same work or work of a similar nature bears on the equal remuneration provisions. Verify the wording of those provisions and the definition of work of a similar nature before relying on the measure for that purpose.
Frequently asked questions
How is compa-ratio calculated?
Divide the employee's pay by the midpoint of their pay range. A ratio of 1.0 means they sit exactly at the midpoint. Use a consistent pay definition, usually fixed pay, and state whether the midpoint is your own range or a market figure.
What is a good compa-ratio?
Around 1.0 for someone fully performing in the role, lower for a recent joiner and higher for a long-tenured or high-performing employee. The bands are conventions, and what matters is applying them consistently rather than the specific numbers.
What does a compa-ratio above 1.2 mean?
The person is paid above their range. That is not automatically an error to correct: it often means the role has grown beyond its grade, in which case regrading is the answer rather than freezing pay until the range catches up.
How is compa-ratio used for pay equity?
By comparing average compa-ratio between groups within the same grade. It is more informative than average pay because it controls for grade, and a persistent gap between groups doing similar work is the clearest internal signal of a problem.
Why does everyone in our organisation have a compa-ratio near 1.0?
Usually because the ranges were built backwards from current pay. A range derived from what people are already paid will always report that they are paid correctly, and the measure tells you nothing.
How Engage supports pay analysis
Engage holds pay, grade, role and tenure together, so compa-ratio can be read by team, by manager, by tenure band and by group rather than only per employee. That is the view that surfaces the patterns worth acting on: compression against new hires, ratios that do not rise with tenure, and gaps between groups doing similar work.
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