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They are different measurements. A CEO pay ratio compares one CEO’s annual total compensation with the annual total compensation of the company’s median employee, and reports the result as a ratio such as 41:1. A pay gap usually means an earnings difference between groups, most commonly women and men, reported as a percentage. It does not mean the SEC CEO-to-worker ratio.
Use the CEO ratio to examine executive compensation relative to a particular company’s workforce. Use a gender pay-gap measure to examine earnings differences between women and men. In either case, the method, population, time period and adjustments determine what the number can—and cannot—tell you. Because “pay gap” is an umbrella term, identify the groups and the pay concept before interpreting any figure.
The two measures at a glance
| Question | CEO pay ratio | Gender pay gap |
|---|---|---|
| Who is compared? | One CEO and the company’s median employee, excluding the CEO | Groups of workers, commonly women and men |
| What is measured? | Annual total compensation under SEC executive-compensation rules | Earnings under a stated statistical definition, often average hourly earnings |
| How is the result shown? | A ratio, such as 41:1 | A percentage difference, such as 18% |
| Where does it come from? | A covered public company’s proxy statement or other required filing | A wage dataset or statistical publication covering a defined population and period |
| How is the comparison point selected? | The company identifies a median employee using a reasonable method allowed by SEC rules | The publisher defines the sample, earnings unit and statistical calculation |
| What does it describe? | The relationship between executive pay and the company’s median-worker pay | The observed earnings difference between the specified groups |
| What does it not establish by itself? | That the company’s pay is fair or unfair, or that one company is directly comparable with another | The cause of the difference, or a legal finding of discrimination |
The word “pay gap” is too broad to stand alone. Name the groups being compared—for example, a gender pay gap or an executive-to-worker comparison—before drawing a conclusion. A ratio also cannot be read as a percentage: 41:1 means the CEO amount is 41 times the median employee amount, while 18% less is a percentage relative to men’s earnings in the stated gender-gap definition.
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What the SEC CEO pay ratio measures
The calculation
Under SEC Item 402(u), a covered registrant discloses three linked figures:
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- The annual total compensation of its chief executive officer.
- The annual total compensation of the median employee, excluding the CEO.
- The ratio of the first amount to the second amount.
The calculation is:
CEO pay ratio = CEO annual total compensation ÷ median employee annual total compensation
If the CEO’s reported compensation is $7,821,993 and the median employee’s is $192,315, the quotient is approximately 41. The filing presents that result as 41 to 1, meaning the CEO’s reported annual total compensation was 41 times the median employee’s amount for that company and year. It does not mean that every employee earned the same amount as the median, or that the CEO received 41 separate forms of pay.
The denominator is a median, not an average. Half of the included employees are above the selected employee on the company’s chosen compensation measure and half are below, subject to the company’s population and estimation choices. That makes the result sensitive to the shape of the workforce, especially the presence of large groups of lower-paid hourly, seasonal or part-time employees.
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The rule implements Section 953(b) of the Dodd-Frank Act and applies to specified executive-compensation disclosures by covered registrants. It does not apply to emerging growth companies, smaller reporting companies or foreign private issuers. The SEC describes the rule and its scope in its Pay Ratio Disclosure rule and the accompanying 2015 adoption announcement.
Therefore, the absence of a ratio in a filing does not automatically mean a company declined to disclose it. The company may fall into an excluded category or may not be filing a document that requires the disclosure. Confirm the issuer’s status and the type of filing before treating a missing number as information about pay practices.
How a company finds its median employee
The SEC does not prescribe one universal payroll calculation. Companies may use statistical sampling or another reasonable method to identify the employee at the middle of their distribution. They may select a consistently applied compensation measure for that task and use permitted estimates and exclusions under the rule.
This flexibility matters because the “median employee” is a constructed comparison point, not necessarily the employee whose compensation is exactly the middle of every payroll component. A company’s employee mix, countries of operation, seasonal staffing, part-time workforce and choice of compensation measure can all affect the result. The SEC’s Division of Corporation Finance says registrants have “substantial flexibility to determine the pay ratio” in its guidance on calculating the pay ratio.
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When reading a filing, separate two steps. First, the company identifies the median employee using its consistently applied measure, sampling approach and permitted assumptions. Second, it reports that employee’s annual total compensation under the executive-compensation disclosure rules. The filing should explain enough of the method for a reader to understand the population used, the date at which employees were counted, any geographic or employee-category exclusions, and any estimates. Those details are part of the number’s meaning, not footnote trivia.
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How often the median can be refreshed
A company may generally use the same median employee for up to three years. It must make a new determination sooner if a significant change in its employee population or compensation arrangements means the previous median would no longer reasonably represent the workforce. A filing should therefore be read for the year of the compensation figures and for any statement that the company reused an earlier median employee.
Reusing a median employee does not freeze the ratio. The CEO’s annual total compensation can change from year to year, and the selected employee’s reported compensation can change as well. A workforce expansion, acquisition, restructuring or change in the geographic mix may also require a fresh determination. Compare years only after checking whether the underlying method and population remain reasonably comparable.
A dated company example
The New York Times Company’s 2025 proxy statement reports a 41:1 ratio for fiscal 2024. It lists CEO annual total compensation of $7,821,993 and median employee annual total compensation of $192,315, and says it reused the median employee identified in 2022 under the rule’s conditions. The figures appear in the company’s 2025 proxy statement.
That is an example of one employer’s method and one fiscal year—not a universal benchmark, an industry average or proof that another company with a different ratio pays its workers better or worse. The arithmetic can be reproduced from the two disclosed amounts, but the comparability question depends on the company’s workforce, assumptions and filing explanation.
What a gender pay gap measures
The ILOSTAT definition
ILOSTAT defines the gender wage gap as the difference between men’s and women’s average hourly earnings, expressed as a percentage of men’s average hourly earnings:
Gender pay gap = (men’s average hourly earnings − women’s average hourly earnings) ÷ men’s average hourly earnings × 100
For example, if women’s average hourly earnings are 82 units and men’s are 100, the unadjusted gap is 18%. Women’s earnings in that example are 82% of men’s earnings; “18% less” does not mean women earn 18% of men’s pay, and it is not an 18-to-1 ratio. The measure is described in ILOSTAT’s wages and working-time concepts and definitions.
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An unadjusted gap reports the earnings difference observed under the selected definition. It does not account for every individual characteristic that might be associated with earnings, such as occupation, industry, seniority, hours, education, location or employment status. Those characteristics may explain part of the measured difference, but the unadjusted statistic does not determine how much each one contributes.
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An adjusted analysis makes additional choices about which characteristics to include and how to model them. It answers a different question. Neither an unadjusted gap nor an adjusted estimate should be described as a complete explanation without the underlying data and method. An adjusted result can change when analysts use a different set of variables, comparison group or statistical model, so it should not be treated as a universal replacement for the headline measure.
Choices that change a gap
Readers should record whether the source uses an average or a median, hourly or monthly earnings, all employees or a subset such as full-time workers, and which geography and period are covered. Part-time work, hours, occupation and the mix of industries can affect an average or median. Two percentages can both be calculated correctly while describing different populations. The denominator also matters: the ILOSTAT definition expresses the difference relative to men’s average hourly earnings.
The global figure for 2026
The International Labour Organization reported on 21 September 2026 that women earn around 18% less than men globally on average. The figure is a global estimate from the ILO’s recent analysis, not a rate for every country, employer, occupation or year. Keep the date and global scope attached whenever you quote it; the ILO’s release is “The gender pay gap narrows by just two percentage points in a decade”.
Why the numbers cannot be swapped
A ratio and a percentage answer different questions and use different populations.
- Population: The CEO ratio uses one named executive and one statistically selected median employee. A gender gap uses groups of workers.
- Compensation concept: The SEC figure uses annual total compensation as defined for executive-compensation disclosure. A gender-gap statistic may use hourly, weekly or monthly earnings and must identify which one.
- Mathematics: “41:1” means the numerator is 41 times the denominator. “18% less” describes a percentage difference relative to men’s earnings; it is not an 18-to-1 relationship.
- Construction: A company chooses a reasonable median-employee method within SEC rules. A wage-gap publisher chooses the dataset, coverage, average or median, time unit and treatment of full-time and part-time workers.
- Time and scope: The CEO figure is tied to a company’s fiscal year and filing, while a gender-gap figure is tied to the dataset’s period and geography. Dropping either detail can make a precise statistic sound universal.
- Inference: Both are descriptive comparisons. Neither number alone explains causes, proves intent or establishes a legal violation.
Converting a CEO ratio into a gender gap—or treating a gender gap as evidence of executive-to-worker inequality—changes the question and produces a misleading result. Even a comparison within one company requires care: the ratio concerns the CEO and the median employee, while a gender analysis may compare women and men across many jobs or within a selected occupation.
How to read a CEO pay ratio in a proxy statement
- Confirm coverage and filing year. Check that the issuer is subject to Item 402(u), identify the fiscal year and verify that the figures are annual total compensation amounts.
- Locate all three disclosures. Find the CEO amount, the median employee amount and the stated ratio. If one is missing, read the explanation rather than filling it in from another source.
- Read the median-employee method. Look for the compensation measure used to identify the median, statistical sampling, estimates, exclusions, geographic scope and employee-count date.
- Check the employee population. Note whether the filing describes seasonal or part-time workers, employees in different countries, or other groups that may affect the distribution. Do not assume the denominator represents a full-time domestic employee.
- Check whether the median employee was reused. A company can generally use the same person for three years, subject to the rule’s significant-change condition.
- Recalculate as a reasonableness check. Divide the disclosed CEO amount by the disclosed median amount and allow for rounding. A small difference can result from the presentation of rounded figures.
- Interpret the result only in context. Compare years within the same company cautiously, and do not rank companies without examining their different workforces and methods.
The SEC’s calculation guidance is the best starting point when a filing’s methodology is difficult to interpret: SEC guidance on calculation of pay ratio disclosure.
How to interpret a gender pay-gap statistic
- Name the groups. Confirm that the comparison is women and men, or identify any broader categories used by the publisher.
- Identify the earnings unit. Note whether the figure uses average or median earnings and hourly, weekly, monthly or annual pay.
- Check the population and geography. Full-time-only, all employees, a single occupation, one country and a global sample can produce very different results.
- Record the period. A gap from one survey year is not automatically current for another year.
- Determine whether it is adjusted. Treat an unadjusted figure as an observed difference, not a decomposition of causes.
- Check the denominator and direction. Under the ILOSTAT definition, the difference is expressed relative to men’s average hourly earnings. A source using another denominator may produce a different percentage for the same raw amounts.
- Use supporting evidence for explanations. To discuss occupation, hours, seniority, promotion, caregiving or discrimination, consult analyses that measure those factors rather than inferring them from the headline percentage.
Common mistakes and how to avoid them
Calling every executive-to-worker comparison a “gender pay gap”
This erases the groups being compared. Say “CEO-to-median-employee pay ratio” when that is the measure in question.
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Two companies may use different employee populations, countries, compensation measures and estimation choices. A large workforce of lower-paid hourly employees can affect a median differently from a smaller professional workforce. Read each methodology before making a comparison.
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Confusing a median with an average
The CEO ratio uses the median employee. A gender statistic may use average hourly earnings. Substituting one term for the other changes the statistic and can reverse how readers understand the workforce distribution.
Turning a ratio into a percentage without saying what is being calculated
A 41:1 ratio says the CEO amount is 41 times the median employee amount. It does not mean “41% more,” and it is not directly comparable with an 18% gender gap.
Dropping the year or geography from a percentage
“Women earn 18% less” is incomplete without “globally, on average, according to the ILO’s 2026 estimate.” A national or company-specific figure may be materially different.
Presenting an unadjusted gap as proof of discrimination
An observed difference can justify further investigation, but the statistic alone does not establish why it exists. Explain the measure first, then cite evidence for any causal or legal conclusion.
Assuming a missing CEO ratio means zero inequality
Check whether the issuer is an emerging growth company, smaller reporting company or foreign private issuer, all of which are outside this SEC requirement.
Ignoring permitted estimates and exclusions
The SEC permits flexibility in how the median employee is identified. If a comparison omits the filing’s estimates, exclusions or geographic scope, it may imply a precision and comparability that the disclosure does not support.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Which measure should you use?
| If your question is… | Use… | What to inspect |
|---|---|---|
| How does the CEO’s disclosed compensation compare with a typical employee’s? | SEC CEO pay ratio | CEO amount, median employee amount, fiscal year and median-selection method |
| Do women and men have different earnings in a defined labor market? | Gender pay-gap statistic | Groups, earnings unit, average or median, population, geography, period and adjustment status |
| Why might an earnings difference exist? | A decomposition or adjusted analysis, not a headline gap alone | Variables included, model assumptions, data quality and remaining unexplained difference |
| Is one company’s executive-to-worker ratio “better” than another’s? | A carefully qualified comparison of filings | Workforce structure, countries, compensation definitions, exclusions, estimates and year |
| Did a company’s disclosed relationship change over time? | Several years of that company’s filings | CEO pay changes, median-employee refreshes, workforce changes and any method revisions |
What each number can support—and what it cannot
A CEO pay ratio can show the scale of the disclosed relationship between the CEO’s compensation and the company’s median employee compensation for a particular year. It can help readers ask whether the company’s workforce mix, compensation policies or executive package changed. It cannot, by itself, measure employee morale, productivity, shareholder returns, compliance, fairness or the value of the CEO’s work.
A gender pay gap can show an earnings difference between women and men under a specified statistical definition. It can help identify a pattern that merits deeper analysis. It cannot, by itself, identify the contribution of job type, hours, experience, location or discrimination, and it is not the SEC’s executive-to-worker disclosure.
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The SEC described its 2015 rule as “a carefully calibrated pay ratio disclosure rule that carries out a statutory mandate,” in the words of then-Chair Mary Jo White. The disclosure is therefore a required transparency measure with defined boundaries, not a complete scorecard for compensation policy.
Bottom line
Use the CEO pay ratio for a company-specific CEO-versus-median-worker comparison, and use a gender pay-gap statistic for an earnings comparison between women and men. Always state the population, compensation or earnings definition, method, geography and year. Those details determine whether the number is informative—or misleading.
Frequently Asked Questions
What is the CEO-to-worker pay ratio?
It is the CEO’s annual total compensation divided by the annual total compensation of the company’s median employee, excluding the CEO, as disclosed under SEC Item 402(u) by covered registrants. A result such as 41:1 means the CEO amount was 41 times the median employee amount for that company and fiscal year.
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No. The CEO ratio compares one executive with one statistically selected median employee. A gender pay gap compares earnings between groups such as women and men, usually as a percentage under a stated earnings definition.
Why can two companies’ CEO ratios be hard to compare?
The SEC gives companies substantial flexibility to identify the median employee. Employee populations, countries, seasonal and part-time work, compensation measures, sampling, estimates and permitted exclusions can differ, so the ratios are not standardized league-table scores.
What does an unadjusted gender pay gap show?
It shows the observed earnings difference under the selected definition and population. It does not by itself explain how occupation, hours, seniority, education, location, employment status or discrimination contributed to the result.
What does “18% less globally” mean in the ILO’s 2026 figure?
The International Labour Organization reported on 21 September 2026 that women earn around 18% less than men globally on average. It is a global estimate, not a universal rate for every country, employer, occupation or year.
Why might a company not publish a CEO pay ratio?
The SEC requirement does not apply to emerging growth companies, smaller reporting companies or foreign private issuers, and not every filing requires the disclosure. Check the issuer’s status and filing type before drawing conclusions from a missing ratio.
Can a company use the same median employee for more than one year?
Generally, yes. A company may use the same median employee for up to three years unless a significant change in its employee population or compensation arrangements means a new determination is needed.
Should an unadjusted pay gap be called discrimination?
Not on the statistic alone. An unadjusted gap is a descriptive difference. A conclusion about causes or legal discrimination requires additional evidence and an analysis that states its variables, data and assumptions.
The Bottom Line
A CEO pay ratio compares one CEO’s annual total compensation with a company’s median employee. A gender pay gap compares earnings between defined groups, commonly women and men. They use different populations, formulas and methods, so always state the measure, scope and year before comparing or explaining either figure.
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