Understanding Employee Compa-Ratio Updates

A company can use a compa-ratio to assess how it pays employees in relation to the midpoint of the employee pay range. Compa-ratios can be used to compare employee salaries to the company intended pay policy. Generally, a compa-ratio of 1.0 means that the employee current salary falls within close parameters of the company pay policy.

The compa-ratio is an employee salary divided by the midpoint amount of the employee pay grade. For example, if an employee in pay grade X has a salary of 35,000 USD, and the midpoint of pay grade X is 38,000 USD, the employee compa-ratio is .921. This means that the employee is making 92.1 percent of the midpoint of his or her pay grade. Compa-ratios might be +/- 1.0 for a number of reasons. For example, a new hire typically has a compa-ratio under 1.0. A compa-ratio over 1.0 could mean that the employee has high seniority or performs well.

When calculating the new compa-ratio, the system uses the midpoint of the pay grades that you defined in the Pay Grade/Salary Range table (F082001). The system also uses the midpoint amount that is effective for the effective date.

When any of the information that the system uses to calculate compa-ratio changes, you must run a batch program to update employee compa-ratios. For example, when you change the mid point amount for a pay grade, you must update the compa-ratio for all of the employees who are assigned to those salary ranges. You can update compa-ratio for one employee or all employees.

You must update employee compa-ratios when you have run the global mass update program for pay grades, rates, or jobs and their salary ranges. You can run this program in either proof or update mode. You can also have the system print a report that lists the updated information.

If the new compa-ratio differs from the existing compa-ratio, and the system is set up to track employee history, the program creates a history record.