One of my contacts commented to me recently :
“I am curious about something…. If compa-ratio defines the relationship between a person’s pay and his internal pay grade mid-point, should there not be a different name for the metric that defines the actual pay rate of the incumbent with the target market midpoint?”
You are right : comparatio (CR) is base / midpoint of salary range and it is an internal measure.
Market ratio (MR) is base / market value of that job (or that level of jobs in the same job family in the survey if you don’t have info on that specific role). The market value is defined by whichever percentile you have declared as relevant for that position (eg : median, 3rd quartile…)
Comparatio should be close to market ratio when the internal salary range midpoints are actually defined in alignment with the pay philosophy, ie the salary range midpoint is closely based on the target market value.
As an extension, comparatio is often used as a form of “proxy” for position-to-market, based on the assumption that the salary range is actually built on market data.
But as you know, this is not always the case !
I usually recommend to use CR as the basis for salary decisions, when the midpoints are aligned with target market pay, and also because we don’t always have data to calculate MR for all jobs.
I recommend to use MR when data is available and when we know that our salary ranges are disconnected from market values (for example they were not updated for many years, or they were created when the company was targeting to pay at median of market but now the company wants to pay at the 65th percentile…).
I did not invent the term Market Ratio, and I think the definition is quite widely accepted, just like the definition of comparatio. But market ratio and when to use it vs when to use comparatio is a concept that is a bit more advanced, so fewer people in the region are aware of the subtle differences between the two.
I hope this short explanation helps you understand these nuances. Which one do you use in your organisation ?