PHR · Question #37
Jennifer is the HR Professional for her organization. Her supervisor, Dan, has asked Jennifer to find the Compa-ratio for Sam. Sam earns $40,000 as a mechanic, but the midpoint for a mechanic is actua
The correct answer is B. 80 percent. The Compa-ratio measures an employee's actual pay relative to the midpoint of their pay grade, expressed as a percentage. Sam's pay of $40,000 divided by the $50,000 midpoint yields 80 percent.
Question
Jennifer is the HR Professional for her organization. Her supervisor, Dan, has asked Jennifer to find the Compa-ratio for Sam. Sam earns $40,000 as a mechanic, but the midpoint for a mechanic is actually $50,000. What is the Compa-ratio for Sam?
Options
- A-$10,000
- B80 percent
- C125 percent
- D$10,000
How the community answered
(22 responses)- A9% (2)
- B86% (19)
- C5% (1)
Why each option
The Compa-ratio measures an employee's actual pay relative to the midpoint of their pay grade, expressed as a percentage. Sam's pay of $40,000 divided by the $50,000 midpoint yields 80 percent.
A negative $10,000 represents the raw dollar deficit between Sam's salary and the midpoint, not the Compa-ratio, which is always expressed as a percentage.
The Compa-ratio formula is (actual salary / pay grade midpoint) x 100. Dividing Sam's $40,000 salary by the $50,000 midpoint and multiplying by 100 gives exactly 80 percent, indicating Sam is paid below the market midpoint for his role.
125 percent would result from dividing the midpoint by Sam's salary ($50,000 / $40,000), which inverts the Compa-ratio formula.
A positive $10,000 is simply the arithmetic difference between the midpoint and Sam's salary, not the Compa-ratio calculation.
Concept tested: Compa-ratio calculation for compensation analysis
Source: https://www.shrm.org/topics-tools/tools/hr-answers/what-is-compa-ratio
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