In a company's merit pay program, an individual's compa-ratio represents:

• A. the comparison between an employee's salary and the industry average
• B. the ratio of an employee's current salary to the midpoint of the pay range for their position
• C. the percentage increase in salary due to merit raises
• D. the ratio of total compensation to total company revenue

Answer: (B)

Verified step by step guidance

1. Understand the concept of compa-ratio: Compa-ratio is a financial metric used in compensation management to compare an employee's current salary to the midpoint of the pay range for their position. It helps assess whether an employee is being paid fairly within the established pay range.
2. Identify the formula for compa-ratio: The formula is \( \text{Compa-ratio} = \frac{\text{Employee's Current Salary}}{\text{Midpoint of Pay Range}} \). This ratio is expressed as a percentage to indicate how close the employee's salary is to the midpoint.
3. Analyze the options provided: Evaluate each option to determine which one aligns with the definition of compa-ratio. For example, the comparison to the industry average or total company revenue is not relevant to compa-ratio.
4. Focus on the correct interpretation: The correct answer is the ratio of an employee's current salary to the midpoint of the pay range for their position. This reflects the purpose of compa-ratio in compensation management.
5. Apply the concept in practice: If you were calculating a compa-ratio, you would divide the employee's current salary by the midpoint of the pay range and multiply by 100 to express it as a percentage.