Compensation Ratio Calculator
Compare two salaries as a simple ratio to assess pay equity or benchmark compensation decisions. Ideal for HR professionals evaluating offers, promotions, or pay-gap analyses.
About this calculator
A compensation ratio (also called a compa-ratio when benchmarked against a midpoint) expresses one salary relative to another as a decimal or percentage. The formula is: Compensation Ratio = salary_a / salary_b. A result of 1.0 means the two salaries are equal. A result below 1.0 means Salary A is lower than Salary B, and above 1.0 means Salary A is higher. This metric is widely used in pay equity analyses to compare an employee's actual pay against a market midpoint, a peer's salary, or a job band midpoint. For example, comparing a woman's salary to a man's in the same role quickly surfaces potential pay gaps. Regular calculation across teams helps organizations stay compliant with pay equity legislation and maintain competitive, fair compensation structures.
How to use
Suppose Employee A earns $72,000 per year and Employee B earns $80,000 per year in the same role. Enter 72000 as Salary A and 80000 as Salary B. The calculator computes: Compensation Ratio = 72,000 / 80,000 = 0.90. This means Employee A earns 90% of what Employee B earns — a 10% gap. If both employees have similar tenure and performance, this gap may warrant a pay adjustment to ensure equity and reduce legal and retention risk.
Frequently asked questions
What does a compensation ratio below 1.0 mean for pay equity?
A ratio below 1.0 means the first salary (Salary A) is lower than the reference salary (Salary B). In a pay equity context, this could indicate that a particular employee or group is being paid less than peers in equivalent roles. Values between 0.80 and 0.95 are common starting points for flagging potential inequities. HR teams typically set a threshold — such as 0.90 — below which a formal pay review is triggered to determine whether the gap is justified by performance, tenure, or skills.
How is a compensation ratio different from a compa-ratio?
A compa-ratio specifically compares an employee's salary to the midpoint of the salary range for their job grade, expressed as a percentage: Compa-Ratio = (Employee Salary / Range Midpoint) × 100. The general compensation ratio in this calculator simply divides any two salaries without referencing a range midpoint. Both metrics serve pay analysis purposes, but compa-ratios are more commonly used in structured compensation band management, while a direct salary ratio is useful for peer comparisons and pay gap studies.
When should HR teams run a compensation ratio analysis across the organization?
HR teams should run organization-wide compensation ratio analyses at least annually, typically before or after merit cycles. It is also best practice to run the analysis whenever there is a significant hiring wave, a merger or acquisition, or a change in pay equity legislation. Proactively identifying outliers allows companies to make targeted adjustments before gaps become compliance liabilities or retention problems. Many organizations now include compensation ratio reporting in their annual DEI disclosures to shareholders and regulators.