Source | LinkedIn : By SK Dwivedi
In any organization, internal salary bends are significant for HR/ C&B Professionals to decide on the pay compensation for different levels in / roles of employees. Internal pay bends are calculated based on the internal pay structure/ ranges for different roles/ levels. But do we think that our internal salary ranges are sufficient to attract, engage and retain good talent for long?
In the current employment market when there is significant gap in demand and supply of qualified and skilled workforce, these internal pay bends are not sufficient to deal with ever expanding expectations of prospective employees particularly Gen Y or people having specialized skill set? So frequent inputs on compensation structure of market and competition becomes mandatory for HR/ C&B Professionals. Though, every organizations may not be able to conduct such studies frequently however, the reports are also subject to various crucial aspects viz inference capabilities, execution and, accuracy and application of the inferences in refining or re-structuring the package bends in the business if the studies are done.
To deal with this issue, let us first understand the concept of Compa- Ratio which is good tool internal benchmarking of the pay structures in the organizations.
Compa-Ratio is calculated as the employee’s current salary divided by the current market rate as defined by the company’s competitive pay policy. It means we can simply calculate the Compa- Ratio of different employees by studying the market pay of particular employee. The Compa-Ratios are position specific. Each position has a salary range that includes a minimum, a midpoint, and a maximum. These three values represent industry averages for any particular position. A Compa-Ratio of 1.00 or 100% means that the employee is paid exactly what the industry average pays and is at the midpoint for the salary range. Ratio of 0.75 means that the employee is paid 25% below the industry average and is at the risk of seeking employment with competitors at a higher pay that may be perceived equitable. A ratio of 1.15 Compa-Ratio would mean the employee is paid above the industry average.
The Compa-Ratio could be computed and maintained for Individuals/ specific Groups or different Functions viz Sales and Marketing/ Manufacturing/ R&D etc. These Compa-Ratios work as compass for C&B Professionals in deciding the pay and compensation for different levels of employees joining any organization. However there are other tools like Employee Growth Matrix, Hi-Pot and Fast Trackers Growth Matrices etc also play significant role in C&B.