Choose a solve to calculate compensation as a percentage of a group average, employee compensation, or the group average. Use consistent pay components and periods.
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Internal Equity Formula
The following formula is used to calculate the internal equity percentage for a given total compensation and average compensation of all employees.
Variables:
- IE is compensation as a percentage of the selected group average; this descriptive ratio alone does not establish fairness
- TC is the total compensation of the employee
- AC is the average compensation of all employees
To calculate the internal equity percentage, divide the total compensation of the employee by the average compensation of all employees and multiply the result by 100.
What is Internal Equity?
Internal equity concerns fairness of compensation within an organization. The ratio above only compares employee compensation with a selected group average; 100% does not prove fairness. A meaningful review considers job content, responsibilities, hours and other relevant differences. The EEOC explains that equal-pay comparisons depend on job content and include multiple forms of compensation. This calculator makes no legal determination.
How to Calculate Internal Equity?
The following steps outline how to calculate the Internal Equity.
- First, determine the total compensation of the employee (TC).
- Next, determine the average compensation of all employees (AC).
- Next, calculate the internal equity percentage using the formula IE = (TC / AC) * 100.
- Finally, calculate the Internal Equity.
- After inserting the values and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
Total compensation of the employee (TC) = $70,000
Average compensation of all employees (AC) = $65,000
