AIHR Compensation Metrics Cheat Sheet

Compensation Metrics

Cheat Sheet

How to use data to

overcome your most

pressing C&B challenges

Why compensation metrics matter

Organizations worldwide are facing an

How to use this guide

unprecedented talent crisis.

In this guide, we will explain how to use 12 key

77% of employers globally are struggling to ?ll

compensation metrics and visualize

roles. According to Korn Ferry, by 2030, the talent

compensation metrics in Excel.

shortage can cost companies $8.5 trillion in

Table of contents

unrealized annual revenue.

¡ñ Salary range metrics

Having an effective compensation strategy is one

of the keys to attract and retain the best talent.

This means you need to track compensation

metrics to understand what is and isn¡¯t working,

and how you can help your organization remain

competitive in the war for talent.

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¡ñ Using ranges for compensation planning

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¡ñ Other compensation metrics

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¡ñ Creating compensation charts in Excel

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1.Target percentile

Example

Formula

Target Percentile = Market Rate ¡Á

If your policy is to pay twenty percent above the

(1 ? Policy Percent)

market rate, your target percentile is 20 percent

above the 50th percentile. It is the 60th

percentile, not the 70th percentile (50+20).

What it means

Your company¡¯s target percentile is where you

pay employees relative to market rates,

In this case, the formula will be applied as

followed:

50 x (1+20%) = 60

expressed as a percentile.

If your policy is to meet the market, your target

percentile will be 50. Anything over the 50th

percentile is leading the market. Targets below

the 50th percentile are lagging the market.

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2. Range midpoint

Formula

Example

Midpoint = Market Rate ¡Á

If your goal is to lead the market by 30% when

(1 + Policy Percentage)

the market rate is $46,000, your range midpoint

would be:

$46,000 ¡Á (1 + 30%) = $59,800

What it means

If your goal is to lag the market by 10% when

This is the exact middle of your range, equally

the market rate for a job group is $46,000, your

distanced from the range minimum and range

range midpoint would be:

maximum, and aligned to the market value of

the job.

$46,000 ¡Á (1 ¨C 10%) = $41,400

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3. Range spread

What it means

The spread or width between the range

minimum (e.g., the 25th percentile) and the

range maximum (e.g., the 75th percentile).

Example

You do not need to calculate the spread, as this

is something that you determine yourself. Do

you want it to be 25%, 50%, or 75%? Different

jobs would have different spreads. For example,

the spreads within an organization can look like

Learn more

A thorough compensation analysis provides

that data and insights you need for critical

decisions relating to salaries and total

bene?ts for employees.

Read the guide

this:

¡ñ Hourly contract positions: 30%-40%

¡ñ Entry to mid-level to managerial positions:

40%-60%

¡ñ Executive positions: 60%-70%

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