People Data & Analytics • 6 MIN READ
Compensation Data Analysis: How to Use Pay Data to Make Better Decisions
MAR 28, 2026
Your pay data contains signals about equity, retention risk, and market competitiveness. Here is how to read them.
The three most important compensation analyses
Compa-ratio analysis compares each employee's salary to the midpoint of their grade band, expressed as a percentage: a compa-ratio of 100% means the employee is paid exactly at the midpoint, below 100% means below midpoint, above 100% means above. This analysis immediately reveals whether your pay distribution is skewed and where salary compression or inflation is occurring. Pay equity analysis compares compa-ratios by gender, ethnicity, and other protected characteristics to identify unexplained pay gaps within grade bands. Market competitiveness analysis compares your grade midpoints to current market survey data to identify where your bands have drifted below the market.
Turning analysis into action
Compensation analysis without action planning produces interesting observations but no improvement. For each gap identified, determine the root cause: is it a data error, a policy gap, or a structural problem? Set a target and a timeline for addressing it. For pay equity gaps, develop a remediation plan that corrects gaps systematically rather than relying on individual managers to address them in the next pay review cycle, where unconscious bias may reproduce the same gaps. Present the analysis and the remediation plan to leadership with a clear cost estimate so the investment can be budgeted.
