- Definition: How much are employees in that salary grade getting paid in the market? This market rate is available from salary surveys conducted by some companies which provide this as a service. It represents 50th percentile of the salaries in the market.
- Let’s assume Market Rate = 10,000 for our grade. It represents 50th percentile of the salaries in the market.
50% of the employees in the grade get paid 10,000 or less. 50% get paid more than 10,000.
- Target Percentile represents your company or organization's policy or strategy for salaries. Would you like to just meet the market, lead or lag behind the market in terms of Salary?
- If your company policy is to meet the market, then your target percentile is 50th.
- To lead the market, target percentile should be > 50th. Example: 60th percentile
- To lag the market, target percentile < 50th. Example: 40th
- Definition: Middle of the salary range for the grade. This is the value used when people usually refer to a grade's salary.
- Calculation 1: When user provides Market Rate and Target Percentile
- Market Rate * (1+ (Target Percentile /100 - 0.5)*2)
- Example: if the Target Percentile is 60th percentile, Market Rate * (1 + (0.60-0.50)*2)
- Calculation 2: If we know the minimum and maximum salaries, it is Average of Minimum and Maximum Salaries. (Min + Max ) / 2
- Definition: Minimum salary for the grade
- Calculation: Midpoint / (1+Spread % /2)
- Definition: Maximum salary for the grade
- Calculation: Minimum Salary * (1+ Spread %)
- Definition: Range of salaries for the grade. Represents the opportunity of growth within a grade.
- Calculation: Maximum Salary - Minimum Salary
- Definition: Range of salaries for a grade, measured with respect to the Minimum Salary of the grade. This allows the spread be compared between grades.
- Calculation: (Maximum Salary – Minimum Salary) / Minimum Salary
Midpoint Differential % (or Midpoint Progression)
- Definition: % Increase in Midpoint from lower grade to higher grade. This represents the increase in potential salary from one grade to the next.
- Calculation: (Midpoint of Higher Grade - Midpoint of Lower Grade) / Midpoint of Lower Grade
- Overlap %
- Definition: Overlapping salary range between lower grade and higher grade measured as % of range of higher grade
- Calculation: (Maximum of Lower Grade - Minimum of Higher Grade) / (Maximum of Higher Grade - Maximum of Lower Grade)
Salary Structure - Key Terms and their calculations Print
Modified on: Wed, 26 Jan, 2022 at 6:24 AM
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