1. Market Rate

    • 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.
  2. 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 

  3. Midpoint

    • 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

  4. Minimum

    • Definition: Minimum salary for the grade
    • Calculation: Midpoint  / (1+Spread % /2)
  5. Maximum

    • Definition: Maximum salary for the grade
    • Calculation: Minimum Salary * (1+ Spread %) 
  6. Range

    • Definition: Range of salaries for the grade. Represents the opportunity of growth within a grade.
    • Calculation: Maximum Salary - Minimum Salary
  7. Spread

    • 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
  8. 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
  9. 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)