Challenging Question - Compa Ratio (PHR, SPHR, SHRM-CP, SHRM-SCP Exams)

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Before I begin, please read the post below where I attempted to answer a candidate's question about compa-ratio and its uses;


The essence of comparative ratio (compa-ratio) is to test how competitive an employee's pay is in comparison to the salary range of a company and the industry's average pay. Salary ranges consist of minimum, midpoint, maximum. Midpoint or 100% means the employee is being paid the exact average pay for that role, for that industry. Less than 100% means the employee's pay is less than the industry average and there is a risk of that employee leaving. It could also mean the employee is new to the role. More than 100% means the employee's pay is higher than the industry average and tilting towards the maximum salary range. This may happen due to exceptional performance or many years of expertise and experience in that role.Just to add, green circles are paid less than the minimum salary range while red circles are over the maximum salary range. I know it is a lot but I hope this helps.


Question

Pam earns an annual salary of 22,500 at the The Wings Company. The salary range for Pam's role at the Wings Company has a minimum of $20, 000 and a maximum of $30, 000. By what percentage is Pam's salary less or more than the midpoint?
a. 90%

b. -12%

c. 10%

d. -10%


Explanation

We need to find the midpoint first by finding the average of $20, 000 and $30, 000 ($20,000 + $30,000 /2 = $25,000). The midpoint is $25, 000.

Next, we need to calculate the compa-ratio for Pam's salary by dividing her salary by the midpoint and multiplying by 100 to get the percentage figure ($22, 500 / $25, 000 *100 = 90%). The compa-ratio is 90%.

Remember, we are to find by what percentage Pam's salary is less or more than the midpoint. The midpoint is always 100%. Therefore, 100% subtracted from 90% is 10%. Pam's salary is 10% less than the midpoint. The answer is C.


Let me know if you have any questions or areas that you want me to explain in the Weekly Challenging Question series.


I wish you success!