When you benchmark pay, you often see percentiles like P25, P50, and P75.
These are simple markers that help you understand what most people earn for the same job in the market.
Think of it like lining up salaries from lowest to highest and then finding “checkpoints” in the line.
What Each Percentile Means
P50 (Median)
This is the middle of the market.
- 50% of people earn below this amount
- 50% earn above this amount
Example:
Finance Manager salaries: 40k, 50k, 60k
The middle is 50k, so P50 = 50k.
P25
This is the lower market point.
- 25% earn below this amount
- 75% earn above this amount
It helps you see what “lower-paying” employers are paying.
P75
This is the upper market point.
- 75% earn at or below this amount
- 25% earn above this amount
It shows what “higher-paying” employers are paying.
Example
Let’s say we are looking at Customer Service Supervisor pay in a specific city.
Salaries (in thousands) from five companies: 30, 35, 40, 45, 60
- P50 (middle) is 40
- P75 is between 45 and 60 (often around 52.5, depending on the method)
If P75 = 52.5k, it means:
- Most people (75%) earn 52.5k or less
- A smaller group (25%) earn more than 52.5k
Why Percentiles Can Change
Percentiles depend on who is in the data right now.
So they can move when:
- new companies join the survey
- some companies leave
- jobs are matched differently
- very high or very low salaries are removed or hidden (to protect privacy)
Example:
If more big banks or multinationals join the sample, the higher salaries may pull P75 up.
If more smaller local companies join, the numbers may shift down.
Important Notes for HR Leaders
- Percentiles are not “the right pay” on their own.
They only describe the market. Your company policy decides what to target. - Many companies pick a market position, like:
- “We pay around P50 for most roles.”
- “We pay closer to P75 for scarce skills like data engineers.”
- “We pay around P25 for entry roles, but with strong learning benefits.”
- Always look at the sample size and reliability.
If the sample is small, the percentile may not be stable. - When comparing over time, check the basics:
date of the data, currency, exchange rate date, and how the data was updated for inflation.
Quick Summary
- P25 = lower market point
- P50 = middle (median)
- P75 = upper market point
- Percentiles help you understand the market, but your pay policy tells you what to do with them.
