How a pay rise is calculated
A raise is a percentage increase on your current pay, so it is the same arithmetic as any other increase:
raise % = ((new pay − current pay) ÷ current pay) × 100
Pay rising from 48,000 to 51,000 is a raise of 3,000 ÷ 48,000 = 6.25%. Going the other way, applying a known percentage to a known salary:
new pay = current pay × (1 + raise ÷ 100)
The calculator above solves for whichever of the three you leave empty, so the same form answers "what percentage is this offer" and "what would 4% get me".
The denominator is your current pay, not the new pay. Dividing the increase by the new figure understates every raise — on the example above it would report 5.88% instead of 6.25%.
Nominal versus real: the raise after inflation
A raise below the inflation rate is a pay cut in everything except the number on the payslip. The correction is not a subtraction — inflation and the raise are both multiplicative, so they divide:
real change % = ((1 + raise ÷ 100) ÷ (1 + inflation ÷ 100) − 1) × 100
A 3% raise in a year when prices rose 4% is (1.03 ÷ 1.04 − 1) × 100 = −0.96%. Subtracting instead would give −1%, which is close enough at these figures but drifts badly at higher rates: a 20% raise against 15% inflation is a real gain of 4.35%, not 5%.
| Raise | Inflation | Real change | What it means |
|---|---|---|---|
| 0% | 3% | −2.91% | A freeze is a real cut |
| 2% | 4% | −1.92% | Below inflation, worse off |
| 3% | 3% | 0.00% | Standing still |
| 5% | 3% | +1.94% | A genuine improvement |
| 6.25% | 4% | +2.16% | The worked example above |
| 10% | 8% | +1.85% | Large numbers, small real gain |
| 20% | 15% | +4.35% | Subtraction would overstate this |
Enter an inflation figure in the optional field and the calculator reports the real change alongside the nominal one. Whichever inflation measure you use — a national consumer price index, or your own rent and grocery bills — the arithmetic is the same; the choice of figure is a judgement about which basket resembles your spending.
Raises compound
Annual raises multiply rather than add, which is why a consistent small raise outruns an occasional large one. Three years of 4% is not 12%:
total growth = (1 + r₁ ÷ 100) × (1 + r₂ ÷ 100) × (1 + r₃ ÷ 100)
1.04³ = 1.1249, so three years of 4% is 12.49% overall. On a 50,000 salary that is 6,245 rather than 6,000 — the extra 245 is the raise applied to previous raises.
| Annual raise | After 3 years | After 5 years | After 10 years |
|---|---|---|---|
| 2% | +6.1% | +10.4% | +21.9% |
| 3% | +9.3% | +15.9% | +34.4% |
| 4% | +12.5% | +21.7% | +48.0% |
| 5% | +15.8% | +27.6% | +62.9% |
| 7% | +22.5% | +40.3% | +96.7% |
| 10% | +33.1% | +61.1% | +159.4% |
The ten-year column is the argument for negotiating the percentage rather than the one-off amount: the gap between 3% and 5% a year is 28 percentage points of salary after a decade, and every future raise is calculated on the higher base.
Working back from a target
To find the raise needed to reach a target salary, divide the target by your current pay and subtract one. Reaching 60,000 from 52,000 needs 60,000 ÷ 52,000 = 1.1538, a 15.38% raise. Spread over three years that is the cube root of 1.1538, or about 4.89% a year.
Reading an offer properly
Gross, not net
A raise is quoted on gross pay, and the take-home increase is smaller because tax is deducted from it — and, under a progressive system, part of the raise may fall into a higher band. A 6% gross raise typically lands as something between 3.5% and 5% in the bank, depending on jurisdiction and income.
Total compensation, not just salary
Pension contributions, bonuses, healthcare and equity are all percentages of something. A 2% salary raise alongside a pension contribution rising from 5% to 8% is a larger change to your total package than the headline suggests.
Promotion versus cost-of-living
A cost-of-living adjustment keeps you level with inflation and is not a reward; a merit or promotion raise is the part above it. Reading a 4% adjustment in a 4% inflation year as a promotion is the most common misreading of a payslip.
Per hour, per month, per year
The percentage is identical at every period, so a 6.25% raise is 6.25% whether you look at it annually or hourly. The calculator shows the monthly equivalent because the monthly figure is usually the one that decides whether a raise changes anything day to day.
How to calculate a pay rise
- Enter your current pay. Type your current salary into the first field, annually or monthly — the percentage is the same either way.
- Enter the new pay or the percentage. Fill in whichever of the two you know, and the calculator solves for the other.
- Add inflation if you want the real figure. Type an inflation rate into the optional field to see what the raise is worth after prices are accounted for.
- Read the monthly difference. The result panel shows the cash increase and the monthly equivalent alongside the percentage.
Frequently Asked Questions
- How do I calculate my raise as a percentage?
- Subtract your old pay from your new pay, divide by the old pay, and multiply by 100. From 48,000 to 51,000 is 3,000 ÷ 48,000 = 6.25%.
- Is a 3% raise good when inflation is 4%?
- No. In real terms it is a cut of about 0.96%, because prices rose faster than your pay. You would need 4% simply to stand still.
- Why is the real raise not just the raise minus inflation?
- Because both are multiplicative. The correct form divides 1 plus the raise by 1 plus inflation. At low rates the subtraction is close, but at 20% against 15% it overstates the gain by two thirds of a point.
- Do three years of 4% raises add up to 12%?
- No, they compound to 12.49%, because each year's raise applies to a salary that already includes the previous ones.
- What raise do I need to reach a specific salary?
- Divide the target by your current pay, subtract 1 and multiply by 100. From 52,000 to 60,000 needs a 15.38% raise.
- Will I see the full percentage in my take-home pay?
- No. The raise is on gross pay, so tax and contributions come out of it, and part of the increase may be taxed at a higher band than the rest of your salary.
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