Page 3

The variation in pay among jobholders relative to the practice line becomes an important measure for determining salary review outcomes. This variation can be measured, and the measure for a particular job is called its compa-ratio.

2.0 Compa-ratios.

If the organisation's practice line is a straight line, then the formula for the line has the following form:

Salary = job points multiplied by the slope of the practice line, plus a fixed value.

The procedure for calculating the line of best fit to the company data (the practice line) yields two figures: the slope of the line, and the fixed value.

In our example these two figures are:

Slope = $130.58c per point Fixed value = $17,043

Which gives, for our sample company, the practice line formula:

Salary = job points multiplied by $130.58c, plus $17,043

Using this formula we can calculate the practice line salary (deemed to be the competent performance salary) for any job size in our sample company. Take a job of size 500 points for example. Applying our practice line formula we have:

Salary = 500 multiplied by $130.58c, plus $17,043

Which equals $82,333.

From Table 1 we see that Job D, with 500 points, is paid $85,000. This is just above the practice line value of $82,333, as also shown on Chart 2.

The ratio of actual pay for a job relative to the practice line level of pay for the job (i.e. fully competent level of pay for the job), expressed as a percentage, is called the compa-ratio for the job. In this particular example, Job D, it is:

$85,000 divided by $82,333

Which, expressed as a percentage, equals 103%.

Hence the compa-ratio for Job D is 103%.

The compa-ratios for all six jobs in our sample company are as follows:

Table 2

Job Job Points Practice Line Salary
(Job Points x $130.58c
plus $17,043
Actual Salary Compa-ratio(%)
Actual Salary
divided by
Practice Line Salary
A 1,200 173,739 170,000 98
B 900 134,565 150,000 111
C 750 114,978 100,000 87
D 500 82,333 85,000 103
E 300 56,217 60,000 107
F 200 43,159 40,000 93

Prior Page Next Page Contents

Copyright (c) 2006 National Remuneration Centre