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Pay Range Penetration Formula:
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Pay Range Penetration is a metric used in compensation analysis that shows where an employee's salary falls within their pay range. It indicates the percentage position of an individual's salary between the minimum and maximum of their pay grade.
The calculator uses the Pay Range Penetration formula:
Where:
Explanation: The formula calculates what percentage an employee's salary represents between the minimum and maximum of their pay range. A result of 0% means the employee is at the minimum, 100% means at the maximum.
Details: Pay range penetration helps organizations analyze compensation equity, identify pay compression issues, make informed salary adjustment decisions, and ensure fair compensation practices across the organization.
Tips: Enter the employee's current salary, the minimum of their pay range, and the maximum of their pay range. All values must be in dollars and valid (salary between min and max, max > min).
Q1: What is a good pay range penetration percentage?
A: Typically, 50-80% is considered healthy. Below 50% may indicate underpayment, while above 80% may suggest limited growth potential within the current range.
Q2: How often should pay range penetration be calculated?
A: It should be reviewed annually during compensation planning cycles or when significant organizational changes occur.
Q3: Can penetration exceed 100%?
A: Yes, if an employee's salary exceeds the maximum of their pay range, this is called being "red-circled" and may require special handling.
Q4: How does pay range penetration differ from compa-ratio?
A: Compa-ratio compares salary to the range midpoint, while penetration shows position within the entire range. Both provide different perspectives on compensation.
Q5: What factors influence pay range penetration?
A: Experience, performance, market conditions, tenure, and organizational compensation philosophy all affect where an employee falls within their pay range.