Mean and Median – How to Interpret the Central Tendency of Compensation
You calculate the average by dividing the sum of the compensation amounts by the number of people. You find the median by sorting the compensation amounts and taking the middle value. If there is an even number of people, the median is the average of the two middle amounts. Both metrics describe the same group from different perspectives.
When to Use the Average
The average includes every crown paid out. It is useful, for example, for analyzing costs per person when comparing similarly defined periods and components.
What the Median Reveals
The median indicates the middle value in a ranking. If only the highest compensation in a larger group increases, the median may remain the same.
Five pay rates in one team
The hourly wages, in order, are 200, 210, 220, 230, and 390 CZK. The total of 1,250 CZK divided by five gives an average of 250 CZK per hour. The median is the third rate, or 220 Kč. Four out of five people are below the average because it is skewed upward by a single high value.
Which figure should you use when discussing wages?
If you want to describe the middle of the group, start with the median. Include the mean, the number of observations, and an explanation of whether the figure represents base pay or total compensation. For a small group, carefully consider who can be given access to the results.
Both indicators are used to measure the gender pay gap. The median can also serve as a benchmark for assessing deviations from a specific pay level.
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Why do the mean and median differ in your calculations?
Using the SmartFP example, we’ll go over both values for a single group and see how to interpret the results in conjunction with the breakdown of rewards.
