Why is Median Salary more important than Average Salary?

To get into the main context, let’s first understand what is median and average salary.

What is the Median Salary?

Median means ‘the middle’. It is the middle value of a series arranged in numerical order (smallest to largest). For instance, take a look at the following set of series arranged in numerical order: INR 4 LPA, INR 5 LA, INR 7 LPA, INR 9 LPA, INR 12 LPA. In this, the middle value is INR 7 LPA and hence, is the median salary. Half of the salaries are smaller than the median salary and half are greater. That means, there is an equal probability of values falling above and below the median salary.

There might be cases where the set of series has two middle values. In such cases, the average of the two values is taken as the median. To understand this, let’s take a look at the following set of series: INR 4 LPA, INR 5 LPA, INR 7 LPA, INR 9 LPA, INR 12 LPA, INR 13 LPA. In this set, INR 7 LPA and INR 9 LPA are the two middle values. To get the median, we will add the two numbers and then divide by 2. That means 7+9=16/2= 8. So, the median salary comes as INR 8 LPA.

What is the Average Salary?

The average value is determined by adding the values in a set of numbers and dividing it by the count of numbers. For example, the salaries offered to 4 employees in a department are INR 6 LPA, INR 8 LPA, INR 10 LPA, and INR 4 LPA. The average salary for that department can be calculated by adding the values and dividing by the total count. That means, 6+8+10+4= 28/4= 7. So in this case, the average salary of the department is INR 7 LPA.

Importance of Median Salary over Average Salary

Both Median and Average salaries represent the central tendency of a set of salaries. Many employers prefer to use the median salary as the industry benchmark. This is because the average salary may not provide a realistic view of the salary offered in a particular industry. On the other hand, the median salary is precise and has an equal set of lower and higher salaries, being the middle value. Thus, it indicates a common salary figure in a neutral way.

To understand it better, let’s imagine there are 10 employees in a company with the following salaries:

Employee	Salary
Employee 1	INR 4 LPA
Employee 2	INR 5 LPA
Employee 3	INR 7 LPA
Employee 4	INR 9 LPA
Employee 5	INR 12 LPA
Employee 6	INR 13 LPA
Employee 7	INR 20 LPA
Employee 8	INR 24 LPA
Employee 9	INR 26 LPA
Employee 10	INR 30 LPA

Average Salary = INR 15 LPA

Median Salary = INR 12.50 LPA

The average salary is calculated to be INR 15 LPA, which is not the true reflection of what the average person is earning. Whereas, the median salary comes out to be INR 12.50 LPA, which is more realistic. Also, it is the most expected value with an equal number of employees having salaries less than INR 12.50 LPA and higher than INR 12.50 LPA.

What Does This Mean?

From the above-elaborated points, it is quite clear that it is best to look for a median salary for a more realistic idea of what you could be earning.