How to Make Sure You Are Internally Equitable by Using the Salary Midpoint Calculator

A salary midpoint calculator is a powerful tool in today's workplace as it addresses the pressing need for fair and transparent pay structures within organizations. As companies grow, maintaining balance and fairness in employee salaries becomes more challenging. The intricacies of internal equity demand a sophisticated approach, and this is where the strategic utilization of a midpoint salary calculator comes into play.

In this article, we will discuss how to efficiently use this tool to achieve internal equity within your organization. We will also tackle its significance, explaining how it can be a game-changer for organizations striving to create a level playing field in their compensation practices.

Before we proceed to the main agenda, let's define what midpoint salary is.

What is Midpoint Salary?

A salary midpoint is the middle point in a salary range for a specific job. It sits directly between the lowest and highest possible salaries, usually referred to as the 50th percentile or 50% range penetration. As we move from the lower range to the midpoint, there is a gradual progression, representing a transition through the 50% mark. The midpoint is precisely situated in the middle of the minimum and the maximum, symbolizing a balanced point in the salary scale.

This table summarizes the concepts of maximum, midpoint, and minimum salary range, providing definitions and explanations based on employee experience:

Salary Range	Definition	Employee Experience
Maximum	The highest salary within the salary range.	Typically reserved for employees with extensive experience, high performance, or specialized skills.
Midpoint	The middle point or average of the salary range.	Attracts mid-level professionals with moderate experience and skills.
Minimum	The lowest salary within the salary range.	Entry-level or less experienced employees may fall within this range.

How To Calculate Salary Range Midpoint

To calculate the midpoint, you can use this midpoint salary range formula:

Midpoint salary = (minimum salary + maximum salary) ÷ 2

• Scenario 1

  A computer programmer with an annual salary range of $59,343 to $75,579.

  Midpoint salary = (59,343+75,579) ÷ 2
  = 134,922 ÷ 2
  = 67,461

  In this example, the midpoint salary for this computer programmer would be $67,461. This represents the average or middle point within the given salary range.

• Scenario 2

  An IT specialist with a salary range of $53,519 to $67,468.

  Applying the same salary midpoint formula mentioned above:

  Midpoint salary = (53,519+67,468) ÷ 2
  = 120,987 / 2
  = $60,493.5

  For this scenario, the salary range midpoint for this IT Specialist would be approximately $60,493.50.

Knowing the midpoint helps organizations make smart choices about salary changes, promotions, and keeping fairness in the workplace, creating a transparent and fair environment. It's also important for salary negotiations and comparisons within a company and can be used as a starting point to decide how much to pay employees, considering their qualifications and performance.

Related: Why the Salary Midpoint Formula Is Crucial to Getting Pay Equity Right

What is Midpoint Progression?

Midpoint progression, defined by calstate.edu, is the percent difference between the midpoint in a range and the midpoint of a range one level higher. It's a common practice in organizations to reward and retain talented employees, providing them with a clear path for salary advancement as they contribute to the success of the company. It also contributes to maintaining internal equity by aligning compensation with the employee's experience and skills.

For example, if an employee is initially hired at the lower end of the salary range, the midpoint progression would involve periodic salary increases or adjustments over time, gradually moving the individual towards the midpoint of the range. This process is often influenced by performance evaluations, promotions, and the overall growth of the employee in their role.

How To Calculate Midpoint Progression

Calculating midpoint progression or differential doesn't require the use of the salary midpoint calculator, but you do need to know the higher and lower midpoints for the calculation.

Midpoint progression = [(higher midpoint - lower midpoint) ÷ lower midpoint] x 100

• Scenario 1

  A computer programmer's current midpoint is $67,461 and the next level's midpoint salary is $75,000.

  Midpoint progression = [(75,000-67,461) ÷ 67,461] x 100%
  = [7539 ÷ 67,461] x 100%
  = 0.1117 x 100%
  = 11.17%

  Here, the midpoint progression of approximately 11.17% indicates that the salary at the next level is roughly 11.17% higher than the current salary.

• Scenario 2

  An IT specialist's current midpoint is $60,493.50 and the next level's midpoint salary is $65,000.

  Midpoint progression = [(65,000- 60,493.50) ÷ 60,493.50] x 100%
  = [4,506.50 ÷ 60,493.50] x 100%
  = 0.0745 x 100%
  = 7.45%

  In this example, the midpoint progression of 7.45% indicates that the employee can anticipate a salary increase of about 7.45% when moving to the next job level.

Benefits of Having an Internally Equitable Compensation System

A fair compensation system, where employees are paid right relative to their peers within the organization, can bring several benefits. Here are some key advantages:

• Fair pay boosts employee satisfaction and motivation.

• Equitable compensation retains top talent.

• Fairly compensated employees are more engaged and productive.

• Transparent pay practices attract high-quality candidates.

• Fair compensation reduces turnover and costs.

• Internal equity aligns with fairness principles for a positive culture.

• Adhering to fair pay practices ensures legal compliance and protection.

• Fair compensation fosters positive relationships with management.

• Compensation-free employees focus on innovation and creativity.

• Equitable compensation fosters loyalty and commitment.

How to Use Salary Midpoint Calculator to Achieve Internal Equity

Using a salary midpoint calculator can help you achieve internal equity by ensuring that employees in similar roles with similar qualifications and experience receive equal pay.

The tool can also help you avoid salary compression, which occurs when new hires are paid more than existing employees in the same role. To use it, you need to have the following information:

• Get the minimum and maximum salaries for the job. You can use market data, benchmarking, or job evaluation methods to determine these values.

• Follow the midpoint salary range formula that I've mentioned above, which is: midpoint salary = (minimum salary + maximum salary) ÷ 2.

Now that you know the midpoint salary formula, let's achieve internal equity by following these four easy steps.

1. Group employees with similar roles based on job requirements.

2. Collect pay data, including current and historical salaries, bonuses, and benefits for these groups.

3. Identify reasons for pay differences, considering factors like performance and education, but not gender or ethnicity.

4. Address unjustified pay gaps by adjusting salaries, improving transparency, and addressing underpaid groups.

Now, use the midpoint progression or salary midpoint differential to calculate the pay progression between two adjacent grades in your pay structure. The salary midpoint differential is the percentage increase from the lower grade’s midpoint to the higher one.

To calculate it, you need to use the following formula I've mentioned above: Salary midpoint differential = [(higher midpoint - lower midpoint) ÷ lower midpoint] x 100.

Using this formula, you can establish a fair and clear pay system for internal equity. However, take note that it's also best to communicate openly with employees about how pay is determined and how they can advance in their career and salary. This builds trust, engagement, and improves retention and productivity.

How Salary.com Can Help for Achieving Internal Equity

Compensation Software can help you achieve internal equity by providing you with integrated compensation data and technology solutions. It's a helpful compensation management software product that includes survey data management, a job description builder, access to the Salary.com worldwide database (HR-reported salary data), and a dashboard to analyze internal pay practices vs. the market.

You can use Salary.com’s Compensation Software to:

• Benchmark your jobs against the market and create salary ranges based on reliable data.

• Compare and adjust salaries for employees in similar roles and identify pay gaps or compression issues.

• Communicate pay decisions and policies to employees and managers with clear and transparent reports and dashboards.

• Align your pay strategy with your business goals and industry trends.