Compensation Glossary

An aging factor is an adjustment applied to historical compensation data to bring it forward to a current effective date. Because market data sources are typically published months after the data was collected, the pay figures they report reflect past market conditions rather than current ones. An aging factor accounts for the time elapsed and the rate at which pay has been moving, producing a more accurate picture of what the market pays today.

A benchmark job is a role that is well-defined, commonly found across organizations, and used as a reference point for market pricing. Benchmark jobs are matched to comparable positions in external market data sources to establish competitive pay references. They form the foundation of a market pricing exercise and anchor the pay ranges built from that data.

A compa-ratio (short for comparative ratio) measures an employee's pay as a percentage of the midpoint for their role or grade. A compa-ratio of 1.0 means the employee is paid exactly at the midpoint. A ratio below 1.0 means they are paid below the midpoint; above 1.0 means they are paid above it. Compa-ratio is one of the most widely used metrics in compensation analysis for assessing pay competitiveness and internal equity.

Compensation benchmarking is the process of comparing your employees' actual pay to external market data to understand how competitive your compensation is. It shows where individual roles, levels, or populations sit relative to the market and helps prioritize where pay adjustments are needed to retain talent, support equity, and stay within budget.

A composite is a blended market reference point created by combining pay data from two or more external sources into a single, weighted value. Rather than relying on one data source for a market reference, a composite draws on multiple sources to produce a more robust and representative pay benchmark. Composites are a standard output of the market pricing process and the basis for most market reference points and pay ranges.

Job leveling is the process of defining and applying consistent levels across roles in an organization, such as associate, mid-level, senior, and principal. Levels describe the scope, complexity, and expectations of work at each stage of a career path. A well-designed leveling framework makes pay decisions more consistent, career progression more transparent, and market pricing more accurate.

Job matching is the process of aligning an internal job to a comparable position in an external market data source. It is the foundation of market pricing: without a valid match, the market data you pull is not relevant to the role you are pricing. Good job matching is consistent, documented, and based on the nature of the work rather than the job title alone.

A market reference point (MRP) is a single pay value derived from external market data that represents the target or anchor for what a role should pay. It is typically expressed as a specific percentile of the market, most commonly the 50th, and is used as the basis for setting pay ranges, evaluating pay competitiveness, and making offer decisions. The MRP is the output of the market pricing process.

Market pricing is the process of using reputable external market data to determine what a role should pay. It involves matching internal jobs to comparable survey jobs, selecting relevant market data cuts, and calculating a competitive pay reference, typically expressed as a percentile like the 50th or 75th.

Pay positioning describes where an organization intentionally places its pay relative to the external market. It is the expression of a company's compensation philosophy in concrete terms: we target the 50th percentile, or we pay in the top quartile of the market for this role. Pay positioning decisions affect how competitive the organization is in attracting and retaining talent and how its compensation costs compare to peers.

A pay range defines the minimum, midpoint, and maximum pay the organization will pay for a role or grade. It provides the boundaries within which pay decisions are made, from hiring offers to merit increases to promotions. Pay ranges are typically anchored to external market data and reviewed periodically to stay competitive as markets move.

In compensation, a percentile indicates where a specific pay rate falls within a distribution of market data. The 50th percentile (P50) means that half of the surveyed organizations pay less and half pay more for that role. Percentiles are used in market pricing to define pay targets and build pay ranges, and they are the primary language through which compensation competitiveness is expressed.