a percentile distribution · two formulas · the language of pay
Compensation benchmarking & surveys
Pay-setting is real-estate comps. Define the property by content, pull comps from multiple sources, age the data, adjust for premiums, set the price using your philosophy. Title-based matching is the most common error — “Engineer II” means ten different jobs across companies.
The percentile language
Survey distributions report P25, P50, P75 (and sometimes P10/P90). Your philosophy decision — lead/match/lag — picks which percentile your range targets. Anchor on P50 for most roles; lead on critical skills; lag intentionally only when the non-cash pillars compensate.
Two formulas senior HR carries
individual position in the range
Compa-ratio = actual ÷ midpoint
Below 0.80 = underpaid. Above 1.20 = overpaid. Used for tenured employees in mature roles. The most common diagnostic in pay-equity audits.
progression position
Range penetration = (actual − min) ÷ (max − min)
Better measure for new hires. Should be 0–25% in the first year, climbing with tenure. Compa-ratio looks “too low” for new hires when range penetration shows healthy progression.
the step most pay-setting skips
Survey data is 6–12 months old. Age it before applying.
A 3–4% typical aging factor brings the data to current market. Hot markets (AI/ML in 2023–24, cybersecurity, healthcare) need more — sometimes 8–12% premiums on top of aging. The exam reliably treats “applied the survey number directly” as a wrong answer when the question describes a new role being priced.
Exam Traps
Job match > job title match
Surveys match by content, not title. Senior HR uses survey job descriptions to map, not internal titles. Critical for accuracy.
Aging the data is required
Survey data is 6-12 months old. Aging factors (3-4% typical) bring to current. Senior HR ages before applying.
Compa-ratio measures position in range
Compa-ratio = actual / midpoint. Below 80% = under. Above 120% = over. Senior HR uses for individual decisions.
Range penetration > compa-ratio for new hires
New hires with under 1 year tenure should be at lower part of range. Range penetration tracks this better.
Title-based matching breaks accuracy
"Engineer II" varies wildly across companies. Senior HR uses survey job descriptions and content matching, not titles.
Three sources triangulate
Single-source bias real. Senior HR uses 2-3 surveys for critical roles. Triangulation drives confidence.
What does the role actually do? Survey job descriptions guide match.
Multiple sources for triangulation. Industry, size, geography matched.
Older comps adjusted to current market. Aging factor applied.
Critical skills, hot market, location premium adjustments.
Min/mid/max range established. Philosophy (lead/match/lag) applied.
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