Money guide
How to calculate a pay raise
A raise is a percentage increase on your old pay. Once you know the formula you can check an offer, compare it with inflation, and estimate how much more actually reaches your bank account.
The raise percentage formula
Subtract your old pay from your new pay, divide by the old pay, and multiply by 100. Always divide by the old pay, because the raise is measured from where you started.
Raise % = (new pay − old pay) ÷ old pay × 100
Salary $52,000 → $55,120: increase $3,120. $3,120 ÷ $52,000 = 0.06 → 6% raise.
Hourly $18.00 → $19.35: increase $1.35. $1.35 ÷ $18.00 = 0.075 → 7.5% raise.
The percentage increase/decrease calculator does this instantly: enter your old pay first and your new pay second.
Working out your new pay from a percentage
If you are offered a percentage instead of a figure, multiply your current pay by one plus the raise as a decimal.
New pay = old pay × (1 + raise ÷ 100)
$60,000 with a 4% raise: $60,000 × 1.04 = $62,400
| Raise | Extra per year | Extra per month | New salary |
|---|---|---|---|
| 2% | $1,000 | $83.33 | $51,000 |
| 3% | $1,500 | $125.00 | $51,500 |
| 4% | $2,000 | $166.67 | $52,000 |
| 5% | $2,500 | $208.33 | $52,500 |
| 10% | $5,000 | $416.67 | $55,000 |
Your real raise after inflation
If prices rise at the same time as your pay, part of the raise only keeps you level. A quick estimate is to subtract the inflation rate from your raise. The exact figure divides the two growth factors.
Real raise = (1 + raise) ÷ (1 + inflation) − 1
5% raise, 3% inflation: 1.05 ÷ 1.03 − 1 = 0.0194 → about 1.94%
Quick estimate: 5% − 3% = 2%, close enough for a rough check.
A raise smaller than inflation is a pay cut in buying power, even though the number on your payslip went up. The inflation and purchasing power guide explains this in more detail.
What reaches your bank account after tax
Extra pay is taxed at your highest (marginal) rate, so the take-home increase is smaller than the headline raise. To estimate it, multiply the raise by the share you keep after income tax and payroll deductions.
A $3,000 raise, assuming about 30% of the extra goes to taxes:
$3,000 × 0.70 = $2,100 more per year, or $175 per month.
In a bracket system like US federal income tax, moving into a higher bracket only taxes the dollars above the threshold at the higher rate, not your whole salary. Tax rates, benefits, and deductions differ by country, state, and personal situation, so treat the 30% above as an illustration rather than your real rate.
Raises compound over time
Each raise is applied to your new, higher pay, so back-to-back raises add up to more than their simple total. Two 3% raises are 1.03 × 1.03 = 1.0609, a 6.09% increase, not 6%. The reverse is also true: a 10% pay cut followed by a 10% raise leaves you at 99% of your original pay, because the raise is measured on the smaller amount.
Checklist before you accept
- Compare the raise with the current inflation rate.
- Convert hourly offers to yearly (hourly rate × hours per week × weeks worked).
- Include changes to bonuses, overtime, and benefits, not just base pay.
- Estimate the take-home difference, not only the gross figure.
This guide explains the arithmetic only and is not tax or financial advice.