How SafeRatio determines reasonable compensation
A transparent, repeatable system built for IRS defensibility.
The system
Six inputs that produce a defensible output.
Role & Duties
Title, responsibilities, and time commitment
Company Financials
Revenue, profit, and scale
Market Compensation
Comparable roles and salary data
Defensibility Logic
How the range holds up under scrutiny
Confidence Band
How certain the result is based on inputs
Corrective Actions
What to do if pay is outside range
IRS-recognized valuation approaches
Three approaches to reasonable compensation
SafeRatio implements multiple IRS-recognized approaches for a stronger, more defensible analysis.
Cost Approach
Many Hats Method
What would it cost to replace each role the shareholder performs? Duties matched to BLS wage data, weighted by time allocation.
Income Approach
Independent Investor Test
After paying the proposed salary, does the company still earn a reasonable return? Validates the Cost Approach result.
Market Approach
Industry Comparison
Benchmarks compensation against similar companies in the same industry and region using salary survey data.
Why multiple approaches matter
The IRS does not mandate a single method. When multiple approaches agree, the result is highly defensible. When they diverge, it flags areas that need attention.
Why it matters
Transparent
Inputs and logic are visible. No black box.
Audit-ready
Consistent structure and documentation.
Repeatable
Use the same system every year.
What you get
Structured outputs, every time.
Defensible compensation range
Market-backed band with clear boundaries
Confidence score
How certain the analysis is given inputs
Adjust salary to mid-range • Document rationale
Corrective action plan
Clear next steps when pay is out of range
Inputs • Logic • Audit trail
Report + audit trail
Documentation you can keep on file
Turn methodology into documentation.
Generate defensible reports in minutes, not hours.