Compensation KPIs That Predict Attrition: Metrics & Thresholds

The Hidden Cost of Ignoring Compensation Signals

Most HR Directors find turnover problems too late. By the time exit talks reveal pay issues, your best workers have already taken other offers. Also, replacing one employee costs between 50% to four times their yearly salary, based on the role and level. So, tracking pay metrics becomes key for company stability and budget control.

While many companies track basic turnover numbers, few closely watch the pay metrics that predict turnover before it speeds up. According to Mercer’s 2025 US Turnover Survey, people leaving by choice averaged 13.0% across fields—up from pre-pandemic levels—making early spotting more vital than ever. So, HR leaders must know which of the 40+ standard pay metrics actually link to workers leaving and at what points action becomes critical. This guide explores the most telling pay metrics, complete with clear thresholds and steps that fit your company’s size.

The Complete Compensation KPI Reference: 40 Metrics That Matter

Knowing the full range of pay metrics helps HR Directors find which signs most strongly predict turnover in their specific setting. Below is the full table of 40 pay metrics, their meanings, how often to review them, and real examples.

#	KPI/Metric	Description	Review Frequency	Example
1	Compa-Ratio	Measures an employee’s salary relative to the midpoint of the market or salary range for their role, identifying under- or over-compensation for internal equity.	Quarterly	An employee earning $55,000 in a role with a $50,000 midpoint has a compa-ratio of 1.10 (10% above midpoint).
2	Pay Gap	Calculates differences in median earnings across genders, demographics, or other groups, supporting equity audits and compliance.	Quarterly	Median male salary of $60,000 vs. female $54,000 results in a 10% pay gap.
3	Turnover Rate	Percentage of employees leaving the organization over a period, indicating overall stability and potential compensation issues.	Monthly	15% annual turnover if 30 out of 200 employees leave in a year.
4	Voluntary Turnover Rate	Focuses on employees leaving by choice, often linked to pay dissatisfaction or engagement.	Monthly	8% if 16 voluntary departures from 200 employees.
5	Retention Rate	Percentage of employees who remain over a period, reflecting the success of compensation and retention strategies.	Quarterly	90% retention if 180 out of 200 employees stay over a year.
6	Total Cost of Workforce	Total expenses for salaries, benefits, and related costs, often as a percentage of revenue.	Quarterly	$10M TCOW representing 60% of $16.7M revenue.
7	Market Ratio	Compares average internal salaries to external market or competitor rates, ensuring competitiveness.	Annually	0.95 if internal average $50,000 vs. market $52,631.
8	Cost per Hire	Average total cost to recruit and onboard a new employee, including internal and external expenses.	Quarterly	$4,000 per hire if $200,000 spent on 50 hires.
9	Time to Hire	Average days from job posting to offer acceptance, impacting agility and costs.	Monthly	42 days average from posting to acceptance.
10	Revenue per Employee	Total revenue divided by number of employees, gauging compensation ROI and efficiency.	Quarterly	$200,000 if $20M revenue with 100 employees.
11	Benefits Spend Rate	Percentage of total compensation devoted to benefits like health and perks.	Annually	30% if $3M benefits out of $10M total comp.
12	Diversity Rate	Percentage of workforce from underrepresented groups, tracking inclusion in hiring and pay practices.	Quarterly	25% underrepresented groups in a 200-person workforce.
13	Employee Net Promoter Score	Measures likelihood of employees recommending the workplace, often tied to total rewards satisfaction.	Quarterly	eNPS of 40 (promoters minus detractors).
14	Absenteeism Rate	Average days absent per employee (excluding planned leave), signaling engagement or burnout.	Monthly	2% if 4 absent days out of 200 workdays.
15	Overtime Hours	Total or average overtime worked, affecting labor costs and employee well-being.	Monthly	5% overtime if 8 hours out of 160 monthly hours.
16	Training ROI	Measures performance gains or cost savings from training relative to investment.	Annually	200% ROI if $10,000 savings from $5,000 training.
17	Promotion Rate	Percentage of employees promoted, linking to career development and pay progression.	Quarterly	10% if 20 promotions in 200 employees.
18	Pay Range Penetration	Indicates how far an employee’s pay sits within their role’s salary band, guiding adjustments.	Quarterly	60% penetration in a $40K-$60K range at $52K salary.
19	Red Circle/Green Circle Rates	Percentage of employees above (red) or below (green) their pay range, flagging anomalies.	Quarterly	5% red circle if 10 employees exceed max in 200.
20	Merit Increase Percentage	Average percentage increase in base pay tied to performance reviews, evaluating incentive effectiveness.	Annually	3% average merit increase across the workforce.
21	Pay Compression Ratio	Measures how close salaries are between levels or tenures, using compa-ratio differences to identify narrowing pay gaps.	Quarterly	96% for a subordinate vs. manager’s 102%, indicating 6% compression.
22	Pay Inversion Rate	Percentage of new hires paid more than existing incumbents in similar roles, highlighting recruitment vs. retention pay disparities.	Quarterly	15% inversion if 3 of 20 new hires exceed incumbent averages.
23	Offer Acceptance Rate	Percentage of job offers accepted by candidates, indicating compensation appeal and hiring effectiveness.	Monthly	80% if 40 acceptances out of 50 offers.
24	Average Tenure	Average years of service per employee, informing retention and succession planning.	Quarterly	5.2 years average across 200 employees.
25	Internal Equity Ratio	Compares pay for similar roles internally across demographics or tenures to ensure fairness.	Quarterly	0.98 ratio between groups, indicating near equity.
26	Pay Range Spread	Percentage difference between minimum and maximum salary in a range, assessing band flexibility.	Annually	50% spread for $40K min to $60K max.
27	Salary Differential	Additional pay for specific conditions like shifts or skills, as a percentage of base pay.	Quarterly	10% differential adding $5/hour for night shift.
28	Percent Below Salary Band	Percentage of employees paid below their range minimum, signaling underpayment risks.	Quarterly	8% below band in a department of 50.
29	Percent Over Salary Band	Percentage of employees paid above their range maximum, indicating potential promotions needed.	Quarterly	4% over band organization-wide.
30	Average Salary by Gender	Average pay broken down by gender, helping identify disparities beyond the pay gap.	Quarterly	$58,000 for women vs. $62,000 for men.
31	Average Salary by Ethnicity	Average pay segmented by ethnicity to uncover and address potential biases.	Quarterly	$55,000 average for a specific ethnic group.
32	Geographic Differentials	Pay adjustments for cost of living or labor in different locations, as a percentage.	Annually	15% uplift for high-cost city employees.
33	Market Index	Compares average employee pay to industry averages, showing overall competitiveness.	Annually	1.02 index vs. industry average.
34	Bonus Pay Percent	Total bonuses as a percentage of base pay, evaluating variable compensation.	Annually	12% of base pay in annual bonuses.
35	Average Promotional Increase	Average pay increase given upon promotion, linking to mobility incentives.	Quarterly	8% average increase for promotions.
36	New-Hire Turnover Rate	Percentage of new hires leaving within their first year, tied to onboarding and pay fit.	Quarterly	20% if 10 of 50 new hires leave in year 1.
37	Time to Productivity	Average time for new hires to reach full productivity, impacting training costs.	Quarterly	3 months to achieve 100% productivity.
38	Training Completion Rate	Percentage of employees completing assigned training, measuring development engagement.	Quarterly	95% completion for mandatory programs.
39	Training Cost per Employee	Average cost of training per employee, balancing investment in skills.	Annually	$1,500 per employee annually.
40	Retirement Rate	Percentage of employees retiring, aiding succession and knowledge transfer planning.	Annually	5% if 10 retirements in 200 employees.

Why Compensation KPIs Predict Attrition More Accurately Than Engagement Surveys

Old engagement surveys capture feelings, yet they lag behind pay data in predicting actual exits. Pay metrics predict turnover because they measure clear, countable conditions that directly shape employee choices. Also, these metrics reveal system-wide issues—such as pay squeeze or unfair merit raises—that one-on-one feedback sessions might miss.

When pay falls below market rates or internal fairness breaks down, employees start looking at other options long before they voice concerns. Research from Proactive Talent shows that metrics like base salary, compa-ratio, and performance ratings greatly improve turnover prediction models using computer analysis. Plus, studies always show that pay-related turnover jumps when specific points are crossed. So, adding pay analytics into your retention strategy gives earlier, more solid turnover warnings than opinion-based checks alone.

Bold Key Point: Pay metrics spot flight risk 3–6 months earlier than engagement surveys, giving HR Directors time to put targeted retention programs in place before high workers mentally check out.

The 7 Compensation KPIs That Most Strongly Predict Attrition

While all 40 metrics provide value, seven pay metrics predict turnover with very high accuracy when specific points are crossed. These metrics directly measure conditions that trigger employee job searches and exits.

1. Compa-Ratio: The Internal Equity Barometer

Compa-ratio measures an employee’s salary against the midpoint of the market or salary range for their role. To be specific, a ratio of 1.0 shows pay at midpoint, while ratios below 0.80 or above 1.20 flag possible issues according to PayGap data. Employees earning well below market midpoint face higher turnover risk, as they feel underpaid compared to peers.

Threshold Alert: Compa-ratios below 0.80 require quick action. Review each quarter to catch drift early, mainly after market salary surveys update. Also, ratios above 1.20 suggest possible promotions or role mismatch rather than flight risk. Use SimplyMerit’s auto compa-ratio tracking to find at-risk employees across teams without manual spreadsheet errors.

Action Strategy:

Small companies (<250 employees): Do spot fixes for roles below 0.80, putting high workers and critical roles first.
Mid-size companies: Set up yearly range reviews to prevent wide squeeze and build tracking dashboards.
Large enterprises: Use central pay software to watch compa-ratio spread in real time with auto alerts.

2. Pay Compression Ratio: The Silent Morale Killer

Pay squeeze happens when salary gaps between experience levels or reporting lines narrow too much. To be specific, when a worker’s compa-ratio reaches 96% of their manager’s 102%, only 6% separates them—breeding anger and turnover. This metric proves highly telling because it captures relative unfairness, which drives exits even when total pay levels seem fine.

Threshold Alert: Squeeze ratios below 10% between levels show system-wide problems. Also, new-hire salaries going above current worker averages by more than 5% signal pay flip, a related turnover driver. Review each quarter, linking squeeze data with people leaving by choice to confirm impact.

Choice Framework:

If squeeze < 10% AND people leaving by choice > 13% → Put off-cycle fixes in place right away.
If squeeze < 5% → Rethink job leveling and range layouts within 30 days.

Bold Key Point: Companies fixing pay squeeze through planned range reviews report clearly lower people leaving by choice in affected teams within two quarters.

3. Voluntary Turnover Rate: The Leading Indicator

People leaving by choice rate singles out employees exiting by their own choice, directly linking pay issues to exits. According to Mercer’s 2025 data, U.S. workers leaving by choice averaged 13.0%, making this the baseline for companies. Rates going above 15% suggest hidden pay or fairness issues needing urgent focus. Also, turnover grouped in specific roles or time spans reveals targeted problems that pay fixes can address.

Threshold Alert: Monthly people leaving by choice going above 1.25% (equal to 15% yearly) requires root-cause study. So, break down turnover by team, time at company, and rating to find patterns. For example, high turnover among employees with 2–5 years at the company often shows poor merit growth or promotion schedules.

Field Change Note: Tech and skilled services fields usually see higher people leaving by choice (18–22%), while making and healthcare average lower rates (8–12%). Compare against your specific field for correct review.

4. Market Ratio: The External Competitiveness Check

Market ratio looks at average internal salaries compared to outside marks, making sure pay stays strong. Ratios below 0.90 show company pay trails market by 10% or more, greatly raising turnover risk. On the flip side, ratios above 1.05 suggest overpay or top-tier placing, based on talent strategy.

Threshold Alert: Market ratios below 0.95 require quick study and possible budget shift. Review yearly or twice yearly aligned with market data updates. Also, break down by role family and location, as pay strength varies a lot across jobs and places.

Real-World Setting: According to the U.S. Bureau of Labor Stats, average weekly earnings in August 2025 reached $1,249.33 for total private sector employees, up 0.3% from July and showing stable but modest growth. Companies with market ratios below 0.95 risk losing talent to rivals offering more strong baseline pay, mainly in tight labor markets where employees have many options.

5. Pay Inversion Rate: The New-Hire vs. Incumbent Dilemma

Pay flip happens when new hires earn more than current employees in like roles, wearing down morale and driving current workers toward other job searches. To be specific, flip rates going above 10% of new hires show system-wide gap between outside hiring extras and internal keeping budgets.

Threshold Alert: Flip rates above 15% demand urgent fixing through keeping fixes or range reset. Track each quarter, looking at new-hire offer data against current worker salary spreads. Also, talk openly with affected current workers about fix schedules to ease anger and prevent early exits.

Bold Key Point: Companies that quickly address pay flip through off-cycle fixes or market-based raises see clearly reduced people leaving by choice among current workers within 6–12 months.

6. Merit Increase Percentage: The Performance Recognition Signal

Merit raise percent shows how well companies reward work output, directly shaping keeping. According to NetSuite’s 2025 pay trends, field averages hover around 3–4% yearly, yet high workers expect 5–7% raises to feel valued and set apart. So, merit budgets below 3% or unfair spread patterns predict higher exits among top givers.

Threshold Alert: Merit raises below 3% yearly risk looking token, mainly during times of 3.7% yearly wage growth (per August 2025 BLS data). Review pay planning software data to make sure high workers receive split raises—ideally 1.5–2× the company average. Otherwise, your best talent will seek employers offering strong recognition aligned with market movement.

7. New-Hire Turnover Rate: The Onboarding and Pay Fit Validator

New-hire turnover rate measures the percent of employees leaving within their first year, often signaling gap between offered pay and role reality. Field marks from ClearlyRated suggest rates above 20% show either poor pay relative to hopes or poor culture fit made worse by pay letdown.

Threshold Alert: New-hire turnover above 20% demands quick study through planned exit talks and offer study. Look at exit talk data to find out whether pay, workload hopes, or culture factors drive exits. After that, adjust offer plans, improve role clarity during hiring, or boost onboarding support to reduce first-year turnover.

Secondary Compensation KPIs That Support Attrition Prediction

Beyond the seven primary signs, several added pay metrics predict turnover when mixed with other signals. These include:

Pay Range Entry (#18): Employees at high entry (>90%) with no promotion path face higher flight risk as they reach range tops.
Red Circle/Green Circle Rates (#19): High percents of over-band or under-band employees signal pay layout mismatch needing planned fixing.
Average Promotion Raise (#35): Raises below 8–10% may fail to keep employees looking at outside chances that usually offer 15–20% raises.
Percent Below Salary Band (#28): Green circle rates above 10% show planned underpay needing budget shift or range fixes.
Average Time at Company (#24): Falling average time at company suggests keeping problems, often rooted in pay strength or career growth limits.
Overtime Hours (#15): Ongoing overtime above 10% of standard hours links with burnout-driven turnover, mainly in exempt roles where no extra pay applies.

How to Act on Compensation KPIs Before Attrition Escalates

Watching pay metrics only gives value when paired with clear action. First, set up quarterly review cycles for all seven main metrics, putting findings into leader dashboards with clear responsibility. Next, create action playbooks that spell out responses for each threshold break. For instance, when compa-ratios fall below 0.80 for high workers, trigger quick spot fixes rather than waiting for yearly cycles.

Also, break down analysis by company size to ensure real-world use. Small companies benefit from targeted, relationship-driven actions with finance and leadership teamwork. Big companies require auto alerts through platforms like SimplyMerit to manage scale across many business units and locations. Mid-size companies often find success mixing technology with quarterly pay committee reviews involving cross-team partners.

Finally, talk openly with employees about pay thinking and fix schedules. Research from Leapsome shows that felt fairness matters as much as total pay levels in keeping choices. So, when thresholds trigger actions, explain the thinking and timeline clearly to rebuild trust and prevent early exits driven by doubt.

Low-Cost Alternatives for Resource-Constrained Organizations

While full pay software gives best results, companies with tight budgets can still use good tracking:

Spreadsheet Templates: Build standard Excel or Google Sheets templates with formulas for the seven main metrics, updated each quarter by HR analysts.
HRIS Built-In Analytics: Use current reporting tools in platforms like BambooHR, Workday, or ADP for basic compa-ratio and turnover tracking.
Annual Benchmarking Surveys: Join free or low-cost salary surveys from work groups (SHRM, WorldatWork) to set market ratio starting points.
Exit Interview Analysis: Carefully code exit talk responses for pay-related themes, tracking trends manually to confirm metric predictions.
Peer Benchmarking Groups: Join field-specific HR networks to share pay data informally and set peer comparison marks.

Use Tip: Start with the three most telling metrics—compa-ratio, people leaving by choice rate, and market ratio—before growing to all seven as resources allow.

Quick Implementation Checklist

Audit current data infrastructure: Confirm you can figure the seven main pay metrics each quarter with current systems.
Set baseline thresholds: Apply field marks (compa-ratio 0.80–1.20, people leaving by choice <13%, market ratio >0.95) at first, then refine based on 12 months of company data.
Establish monitoring cadence: Schedule quarterly reviews for most metrics, monthly for people leaving by choice to enable fast response.
Create intervention playbooks: Write down specific actions for each threshold break by company size, including escalation paths and budget approval processes.
Integrate into leadership reporting: Add pay metric dashboards to executive reviews with trend analysis and suggested actions for visibility and responsibility.
Train HR teams: Make sure all pay analysts know metric definitions, figuring methods, thresholds, and escalation protocols through planned training.
Validate with exit data: Link pay metrics with exit talk themes each quarter to refine telling accuracy and find emerging patterns.
Communicate philosophy: Share pay strategy and fix processes openly with employees through manager meetings, town halls, or internal communications.

Key Takeaways

Seven pay metrics—compa-ratio, pay squeeze, people leaving by choice, market ratio, pay flip, merit raises, and new-hire turnover—predict turnover most reliably when specific points are crossed based on 2025 field data.
Pay metrics spot flight risk 3–6 months earlier than engagement surveys, enabling proactive keeping actions before exits happen and replacement costs rise.
2025 marks show people leaving by choice averaging 13.0% nationally, with major field changes requiring segment-specific threshold setting for correct risk review.
Quarterly watching combined with auto tools or planned spreadsheet processes eliminates manual errors and ensures timely action across all 40 pay metrics.
Open talk about pay thinking eases turnover even when quick threshold fixes aren’t financially possible, as felt fairness drives keeping choices.

Conclusion: From Reactive Exits to Proactive Retention

Old HR approaches treat turnover as unavoidable, reacting with exit talks and replacement hiring after employees leave. However, pay metrics predict turnover patterns months ahead, transforming keeping from reactive crisis management into proactive workforce planning. By watching the seven main metrics outlined above—and acting firmly when thresholds are crossed—HR Directors reduce people leaving by choice, lower replacement costs that can reach four times yearly salary, and preserve company knowledge.

The evidence is clear: companies using data-driven pay analytics outperform peers in keeping, employee satisfaction, and workforce stability. Whether through full software platforms or careful spreadsheet processes, planned metric watching represents the difference between losing your best talent and building a lasting competitive advantage through superior workforce management.

Ready to eliminate pay guesswork and reduce turnover? Contact MorganHR to explore how strategic pay analytics can transform your keeping strategy from spreadsheet chaos to data-driven confidence.

FAQ

Q: How often should I review compensation KPIs predict attrition metrics?
A: Review most metrics each quarter, aligning with pay planning cycles and financial reporting periods. However, watch people leaving by choice monthly to spot emerging trends early and enable fast response before patterns solidify.

Q: What’s the single most predictive compensation KPI for attrition?
A: Compa-ratio below 0.80 combined with people leaving by choice above 13% (2025 mark) provides the strongest telling signal, as it captures both pay unfairness and behavior outcomes at the same time. However, pay squeeze and market ratio provide critical context.

Q: Can small companies implement all seven metrics without dedicated compensation software?
A: Yes, but manual tracking increases error risk and delays insights. Start with planned Excel templates for compa-ratio, people leaving by choice, and market ratio. Or, many HRIS platforms include basic analytics that can be used before investing in specialized tools.

Q: How do I distinguish between compensation-driven attrition and other causes?
A: Link exit talk data with pay metrics carefully. When leaving employees cite “better opportunity” or “compensation,” cross-reference their compa-ratio, recent merit raise, and market ratio to confirm pay-related drivers versus management or culture issues.

Q: What if my organization can’t immediately fix compensation KPI thresholds due to budget constraints?
A: Talk openly about timelines and put high workers first for early fixes within available budget. Or, explore non-money keeping strategies (flexible work, growth opportunities, title changes) while building business cases for future budget increases using turnover cost data.

Q: Do these thresholds apply equally across industries?
A: No. Technology people leaving by choice usually runs 18–22%, while making averages 8–12%. Market ratios vary a lot by sector based on talent scarcity. So, confirm thresholds against field-specific data yearly using surveys from work groups or pay consultancies.

Q: How does remote work impact compensation KPIs predict attrition strategies?
A: Remote work expands rival labor markets greatly, making market ratio watching more critical as employees can access opportunities nationwide. Also, location-based pay gaps require reset as employees relocate without role changes, possibly creating internal fairness challenges across locations.

Q: Should I share compensation KPI dashboards with managers?
A: Yes. Equipping managers with team-level compa-ratio and turnover data enables local keeping actions and earlier escalation of at-risk employees. However, restrict access to grouped data to protect individual privacy and train managers on appropriate use to prevent inappropriate salary discussions.

Additional Resources

Want to dive deeper into compensation analytics and attrition prediction? Explore these evidence-based resources:

12 Employee Turnover and Retention KPIs to Measure in 2025 – NetSuite guide on tracking turnover trends with HR software
Predicting Employee Attrition: A Comprehensive Guide – Case study on using compensation metrics in predictive models
Results of the 2025 US Turnover Surveys – Mercer data on voluntary turnover benchmarks
What is a Compa Ratio? Formula & Best Practices – AIHR detailed guide with threshold recommendations

MorganHR Point of View: Most companies treat pay as a yearly event rather than an ongoing strategic lever. At MorganHR, we believe proactive metric watching transforms pay from cost center to keeping engine. By catching turnover signals early—before employees mentally check out—HR Directors shift from damage control to workforce optimization. The question isn’t whether you can afford pay analytics; it’s whether you can afford to keep losing talent to preventable pay issues that surface only after exit talks reveal the damage. Our experience with hundreds of companies shows that planned watching of these seven metrics reduces people leaving by choice by 20–35% within 18 months while improving employee satisfaction and company credibility around fair pay practices.

Compensation KPIs Predict Attrition: Metrics & Thresholds