An excerpt from Human Capital Systems, Analytics and Data Mining
Distribution of Employees across Salary Ranges is important in Compensation, and in general Human Capital Employee Asset Management. Typically, Salary Ranges or Pay Grades are divided into four segments referred to as Quartiles. The middle point of the Salary Pay Grade Range Employees is referred to as the Midpoint. The Salary Range Midpoint is targeted as the market rate for Jobs assigned to the Salary Grade. Occupation Groups with normally dedicated Salary Structures are found for Executive, Management, Engineering, Systems, Maintenance, Sales and others.
Pay Policies in terms of Market Competitiveness will typically vary by Occupation Group due to such factors as Labor Supply and the degree to which employees in certain Occupations directly affect the success of products and services delivered by the organization. Compa-Ratios are ratios related to either External or Internal Salary Comparisons.
A common Internal Compa-Ratio is the comparison between a salary of an individual employee and their Salary Range Midpoint expressed as a ratio. For example, an Internal Compa-Ratio of 110% would indicate a salary placement of 10% above the Salary Range Midpoint. Salary Ranges will vary in terms of width and in many Professional and Management Structures will increase in terms of width the higher up in the Salary Structure the Salary Grade resides as depicted in Figure 4.18 below.
Employee distribution across Quartiles in assigned Salary Ranges and Internal Compa-Ratios are both important in knowing how the Compensation Plan and Employment Practices are interacting together with respect to Employee Salary Placement and Progression.
Consider the Quartile Distribution Chart below from Chapter 4 in Human Capital Systems, Analytics and Data Mining. Employee population appears to be distributed across Salary Range Quartiles in about the same percentage across all Divisions except for Sales and Marketing that has a high number of employees paid under Salary Range Minimum. The 2nd Quartile, which runs up to the Salary Range Midpoint is arguably the most active Salary Range Segment across all Divisions, which would indicate that either the workforce does not have a long Length of Service Record or the Salary Progression Plan limits movement to a large degree above the Midpoint. Another possibility is that the Salary Structure has been moved considerably in advance of a lower funded Merit Increase Program or any combination of such factors.
In viewing Average Compa-Ratios by Job Family, we can see a closer picture of the relationship of Salaries currently earned relative to the Market Vis a Vis the Pay Policy Line based on a Matching Policy to current Market Rates for all Occupation Groups. A common Internal Compa-Ratio is the comparison between a salary of an individual employee and their Salary Range Midpoint expressed as a ratio. For example, an Internal Compa-Ratio of 110% would indicate a salary placement of 10% above the Salary Range Midpoint. This would be opposed to either a Lead or Lag position to the Market.
In the Figure above from from Chapter 4 in Human Capital Systems, Analytics and Data Mining, a range for Compa-Ratios of 70% to 130% across Job Families is seen with most Job Families hovering close to the Average Compa-Ratio of 93.48% and Median at 93% (overall Average and Median Compa-Ratios are shown later in the overall Dashboard). The overall picture is good relative to Market Competitiveness and Internal Salary Distribution at this level. However, to be more confident in such an assessment Drilling Down further is necessary. Analytics must always be viewed with caution directly related to the altitude of the view or level of aggregations seen.
A more in depth look at Salary Range Distribution Analytics is contained in the Book Human Capital Systems, Analytics and Data Mining