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Compensation and Benchmarking Presentation

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Vaishali Jain
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23 views7 pages

Compensation and Benchmarking Presentation

Uploaded by

Vaishali Jain
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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EMPLOYEE COMPENSATION

AND BENCHMARKING
ANALYTICS

ARUNDHATHI B
MARKET RATE & MARKET INDEX

• The MARKET RATE OR MARKET VALUE of a job is the usual salary offered for a particular job in
the job market. This is obtained from internet sources, researching on salary ranges of various
companies, networking and talking to experts etc.

• Market index is the ratio of an employee's base salary to the actual market rate of pay for their
job. It provides a measure of how employee pay compares to the market rate specific to their
position.

• Market index = Salary / Market Rate.

2
COMPA RATIO
Compa Ratio = (Employee's Salary / Salary Range Midpoint) * 100

• The compa ratio, also known as the compensation ratio, is a metric used to compare an
employee's current salary or compensation to the midpoint of the salary range for their position. It
is often expressed as a percentage.
• The compa ratio provides insights into how an employee's compensation aligns with the internal
pay structure of the organization. It helps determine whether an employee's salary is below, at, or
above the midpoint of the salary range.

• Compa ratio < 100% = employee's salary is below the midpoint = may require a salary
adjustment or review.
• Compa ratio > 100% = employee's salary is above the midpoint
3
SALARY RANGE PENETRATION:
(Employee's Salary - Minimum of the Salary Range) / (Maximum of the Salary
Range - Minimum of the Salary Range) * 100
• The term "salary range penetration" refers to the positioning of an employee's salary within the salary range established
for a particular job position. It is used to measure how an employee's salary compares to the minimum and maximum
values of the salary range.
• Comparison with Benchmark Data: Compare the salary range penetration to external benchmark data or industry
standards.
• If the salary range penetration significantly exceeds the market average or recommended guidelines, it may indicate high salary
inflation.
• If the salary range penetration significantly falls below the market average or recommended guidelines, it may indicate salary
compression.

• Deviation from Internal Norms: Consider the internal policies and practices within the organization. If the salary range
penetration deviates significantly from established internal norms, such as internal equity guidelines or pay structures, it
may suggest high salary inflation. If the salary range penetration deviates significantly from established internal norms,
such as internal pay equity considerations, it may suggest salary compression.
4
SALARY RANGE PENETRATION:
(Employee's Salary - Minimum of the Salary Range) / (Maximum of the Salary
Range - Minimum of the Salary Range) * 100

Relative Proximity to Range Maximum Relative Proximity to Range Minimum


• Salary range penetrations • Salary range penetrations
approaching or exceeding 100% approaching or below 50% indicate
indicate that an employee's salary is that an employee's salary is close to or
close to or at the maximum of the below the midpoint of the salary
salary range. range.

• This suggests a significant level of • This suggests a significant level of


salary inflation, as the employee's salary compression, as the employee's
compensation has expanded toward compensation is compressed towards
the upper boundary of the range. the lower boundary of the range.

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• In both cases, the company needs to address these deviations in
salary range penetration to ensure internal equity, fair
compensation practices, and the retention of experienced
employees.

This might involve recalibrating the salary ranges, revising the


pay structure, and making adjustments to compensation
packages based on factors such as experience, skills, and
market trends.

6
“YOU CAN’T MANAGE WELL WHAT YOU CAN’T MEASURE WELL”

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