# How to Calculate a Salary Comp Ratio

How is Sally in your IT department being paid relative to your other IT staff? Are you paying a competitive market wage for a new position in your business?

Employers often need to know how one employee's compensation compares to the compensation of other employees. This is where a salary compensation ratio comes into play. This ratio helps you determine where the employee's pay falls within a certain salary range.

## The Mathematical Formula

The first thing you must know before you can calculate an employee's comp range is the range for the position. This means determining the low salary and high salary. For example, a salary range for the employees in your IT department might be ​\$35,000​ to ​\$60,000​.

Make sure you use salaries for similar jobs within a department. You don't want to compare an entry-level programmer to your CIO. If you are performing a comp range for one of 11 employees working on your e-commerce store, use those salaries to create your range.

The next thing you must know is the midpoint of the salary range. Add the low and high ends of the range and divide by two. In the example above, add ​\$35,000​ and ​\$60,000​ to get ​\$95,000​ and divide that by two to get ​\$47,500​. That is the midpoint of the salary range for these positions.

To calculate the salary comp range, divide the actual salary of the employee you're checking by the midpoint of the salary range and multiple that by 100, explains Salary.com.

If the salary of an employee in the ​\$35,000​ to ​\$60,000​ range is ​\$45,000​, divide ​\$45,000​ by the midpoint of the range ​(\$47,500​) and multiply by 100. That comes to 94.7 percent. This means your employee is making roughly 95 percent of the midpoint of your salary range for these positions.

Is this employee worth lower compensation than the average employee in the department? If not, you might want to consider a pay raise.

## What if You're Hiring a New Employee?

If you are hiring a new employee and don't have enough comparable staff members to know what the position is worth, what can you do to set a reasonable compensation for the new hire?

Visit job websites like Indeed.com to see the salary ranges being offered for similar positions in your area. Visit the U.S. Bureau of Labor Statistics and search its Occupational Outlook Handbook area to find salaries for similar jobs at the national level, such as the BLS results for a search of Human Resources Managers.

Then, decide whether you want to pay more than the going market rate to attract better candidates.

If most of the applicants you're going to get are of similar quality – because it's a low-level position, for example – you might want to pay slightly more to fill the position quicker. If you feel your benefits, workplace culture and reputation make you an attractive employer, you probably don't need to pay more than the going market rate.

## Don't Forget Benefits

Remember to consider the full extent of an employee's compensation beyond salary. Benefits such as health insurance, relocation reimbursement, tuition, conference travel, free gym membership, free parking or commuter pass, flex time, and dental or vision insurance all make up a person's compensation package.

Even giving an employee a specific title that she wants can be a benefit. You won't have to pay as much in salary if you feel your benefits – such as telecommuting – make the position particularly attractive.