Are You a Mean Person? Or a Median one? Understanding the difference between mean and median pay gap calculations.
When it comes to measuring the gender pay gap (GPG) in Australia, two key calculation methods are used by the Workplace Gender Equality Agency (WGEA) to determine both our national and industry GPG metrics, and also those of the organisations reporting to WGEA. They are the mean and median calculations. Though both approaches aim to provide insights into pay inequity between men and women, they serve different purposes and can yield different results.
Understanding these differences has never been more important because next year, WGEA will publish both mean and median GPGs of reporting organisations. So, before you walk into that board or leadership team meeting, let’s unpack the differences and, better still, let us help you explain what they are telling you about your organisation’s gender pay gap.
Remind Us, What Is the Gender Pay Gap?
The gender pay gap is the difference between women’s and men’s median or average earnings* and is expressed as a percentage of men’s average earnings. WGEA states, ‘The gender pay gap is a measure of how we value the contribution of men and women in the workplace’. It's not just a numbers game - pay disparity can occur for many reasons, such as bias and/or discrimination, occupational segregation, and unequal access to opportunities for career advancement.
Before we unpack the Mean and Median, here's an overview of the calculation methodology:
The equidi platform calculates both of these across every part of your business, in real-time, all the time. Reach out to learn more about how our award-winning technology.
The Mean Gender Pay Gap
The mean gender pay gap is calculated by taking the average of all men’s earnings and the average of all women’s earnings in your organisation, then comparing the two figures. For an organisation reporting to WGEA, this is taken from a snapshot date over the past 12 months, and it is calculated based on all employee’s actual base salary and total remuneration.
What are the benefits of the Mean?
✅ It provides a complete picture by taking into account all employees in your workplace, capturing the entire distribution of salaries and earnings.
✅ It helps highlight overall gender pay inequity across an organisation.
What are the limitations of the Mean?
⛔️ The mean can be skewed by outliers—particularly very high earners—causing the gap to appear larger or smaller than it truly is for most employees. For example, if there are a few very high-paid male executives, this can distort the average figure. However, this does indicate a lack of representation of women in senior roles, and actions and strategies should be put in place to create a more balanced team.
⛔️ It does not reflect the typical individual factors that can impact a pay gap, such as experience, tenure, or performance ratings of most employees, especially if the workforce is heavily stratified by pay levels or grades. This requires more analysis and segmentation to understand the root cause of the gender pay gaps, or to determine an adjusted pay gap.
The Median Gender Pay Gap
The median gender pay gap, is calculated by identifying the middle value of male and female salaries separately, and then comparing the two medians. This year was the first year that WGEA publically reported on the median pay gap. The next data that will be published for organisations in 2025 will include both the mean and median GPG for both base salary and total remuneration. Because the median is the middle value, for many organisations, their mean pay gap may increase when it comes to reporting for this year. If this is the case for your organisation, this article should help you prepare for addressing it.
What are the benefits of the Median:
✅ The median offers a better reflection of typical earnings for most employees because it is not influenced by extreme values (i.e., outliers).
✅ It can more accurately represent the "midpoint" of earnings, showing a clearer picture of where the majority of men and women in an organisation are situated on the pay scale.
What are the limitations of the Median:
⛔️ The median may obscure extreme inequities at the higher or lower ends of the pay spectrum, which the mean would capture.
⛔️ It can fail to account for gaps in pay structures within certain departments or divisions where the representation of men and women is unbalanced. You can overcome all of this simply with the equidi platform.
Which Is Better to Talk About in My Organisation?
Neither the median nor the mean is inherently “better”; each serves a specific purpose in analysing the gender pay gap.
The mean is better suited for understanding the overall pay disparity, including the impact of high earners and low earners within an organisation.
The median offers a more accurate reflection of typical earnings, which is especially useful for identifying pay discrepancies among all employees.
Should I Consider Both Measures Together?
To truly understand gender pay inequity, it is helpful to consider both the median and mean pay gaps (and further analysis) together from both a base salary and total remuneration perspective.
If the median gap is small but the mean gap is large, it usually indicates a disproporate number of high-earning men influencing the mean calculation - suggesting gender inequity at the top level in the organisation. As mentioned before, this can indicate the underrepresentation of women in senior roles – and requires a clear strategy to address it.
This is a persistent problem across the country; just see the image below from the WGEA Data Explorer on the workforce composition of reporting organisations across Australia:
If both the mean and median pay gaps are similar, this suggests a more uniform disparity across the pay structure, and proper analysis should be done to understand and action the root cause.
See below how equidi uses many different factors and data points to analyse an organisation’s gender pay gaps.
The Future State
Early next year, WGEA will publish both the mean and median GPGs for reporting organisations across Australia. This will be the first time that both median and mean pay gaps will be published for organisations. Now is a good time to reflect on your organisation's progress this year, and now that you are up to speed with the mean and median - how you may start playing this back to your organisation and stakeholders more broadly.
If you want to learn more about how equidi's award-winning platform can accelerate your organisation's progress, then Book a Demo today! If you want to understand how equidi can help you understand, analyse and close your gender pay gaps.
