The target market percentile is the specific position in the market pay distribution that a firm sets as its reference point for compensation decisions. It is the answer to the question: relative to our peer group, where do we want to pay? A firm targeting P50 aims to pay at the market median — in line with the midpoint of the market. A firm targeting P75 aims to pay above 75% of comparable firms at each career level.
The target market percentile is the most direct and practical expression of a firm's compensation philosophy in benchmarking terms. It translates a strategic intent — to be a market-competitive employer, a premium payer, or a cost-conscious one — into a specific, measurable position that can be used to design pay structures, set individual salaries and evaluate whether the firm is meeting its own stated objectives.
Common Target Percentile Choices
- P50 (median) — The most common target. A P50 strategy positions the firm as market-competitive without aspiring to lead the market on pay. It assumes that the firm's non-pay offer — career development, brand, culture — is strong enough that it does not need to out-pay the market to attract and retain the people it needs.
- P60–P65 — A modest above-median position, common among firms that want to be clearly competitive without committing to the cost of a top-quartile strategy. Often used as a pragmatic compromise between cost discipline and talent competitiveness.
- P75 (upper quartile) — A premium positioning strategy, signalling a deliberate commitment to paying above most competitors. Typically adopted by firms competing for scarce specialist talent, operating in markets where supply is tight, or where the talent strategy explicitly prioritises pay as a differentiator.
- Above P75 — Less common as a firm-wide target, but used in specific lines of business or for specific career levels where competition for talent is exceptionally intense and the cost of losing key people is very high.
Target Percentile and Pay Structure Design
The target market percentile is the anchor point from which pay ranges and salary bands are designed. In practice, the midpoint of a salary band is typically set at the firm's target percentile for that career level and line of business. The minimum and maximum of the band are then set as a spread around that midpoint.
This means that all pay structure decisions flow from the target percentile choice. A firm that says it targets P50 but sets its band midpoints at P65 data is not actually targeting P50 — there is an inconsistency between the stated philosophy and the structural reality. Ensuring coherence between the target percentile, the data used, and the resulting structures is an important governance discipline in compensation management.
Target Percentile vs Actual Position
The target market percentile is what a firm aims for; the actual market percentile is where it sits today. These are not always the same, and the gap between them is one of the most useful diagnostics in compensation management.
A firm targeting P50 whose average compa-ratio across a career level is 0.88 is paying approximately 12% below its own target — a signal that either pay structures have drifted, that the market has moved faster than internal pay, or that individual pay decisions have not been made with sufficient reference to the external benchmark. Identifying and closing this gap is the core purpose of the annual salary review and benchmarking process.
Target Percentile Across Lines of Business
Many firms apply a single target percentile across all lines of business — a P50 strategy everywhere, for example. This is administratively simple but may not be strategically optimal, because the talent markets for different consulting specialisms are not equally competitive. A firm that targets P50 in a high-demand practice where top talent is aggressively recruited may find it is systematically losing people, while the same P50 target in a lower-demand practice may be unnecessarily expensive.
More sophisticated firms apply differentiated target percentiles by line of business — targeting P75 in high-demand specialisms and P50 or below in areas where talent supply is more favourable. This requires more granular benchmarking data by LoB. See also Market Positioning, Competitor Set and External Competitiveness.