How to Calculate a Pay Raise and What It Is Worth After Inflation

New pay from a raise percentage

new pay = current pay × (1 + raise % ÷ 100)The raise itself is current pay × raise % ÷ 100.

Worked example: a salary of $52,000 with a 3.5% raise. The raise is 52,000 × 0.035 = $1,820, so the new salary is 52,000 + 1,820 = $53,820. As an hourly wage, $25.00 becomes 25 × 1.035 = $25.875, which payroll would usually round to $25.88. The percentage calculator finds the raise amount for any pay and rate.

Working out the percentage from two amounts

raise % = (new pay − old pay) ÷ old pay × 100

If you are earning $18 an hour and are offered $20, the raise is (20 − 18) ÷ 18 = 0.111, or 11.1%. This also helps when you plan to ask for a specific figure: divide the gap between the target and your current pay by your current pay. The percentage increase calculator does the same calculation from any two numbers.

Worked example for asking: you earn $52,000 and want $58,000. The gap is 6,000, and 6,000 ÷ 52,000 = 0.1154, so the request is an 11.5% raise. Knowing the percentage helps you judge whether the request is modest or large compared with typical annual increases at your employer.

To scale an hourly raise to a year, multiply by yearly hours. A raise of $1.50 an hour on a 2,080-hour year is 1.50 × 2,080 = $3,120.

Back-to-back raises

Two raises in a row act on different bases, so they multiply instead of adding. A 3% raise followed by a 4% raise gives 1.03 × 1.04 = 1.0712, a total of 7.12%, not 7%. The gap grows with bigger percentages. The same logic is behind why percent changes do not add up.

Repeated yearly raises compound in the same way. Five annual raises of 3% each multiply to 1.03^5 = 1.1593, so a $52,000 salary reaches about $60,282, a total gain of 15.9% rather than 15%. It also works in reverse: to find the average yearly raise over several years, take the root of the total growth factor instead of dividing the percentage by the number of years.

The real value of a raise after inflation

A raise that matches inflation leaves your buying power unchanged. To measure the real change, divide the growth in pay by the growth in prices:

real change = (1 + raise) ÷ (1 + inflation) − 1Use decimals: 4% is 0.04.

Worked example: a 4% raise while prices rise 3% gives 1.04 ÷ 1.03 − 1 = 0.0097, a real gain of about 0.97%. A 3% raise while prices rise 5% gives 1.03 ÷ 1.05 − 1 = −0.019, a real loss of about 1.90%. The common shortcut of subtracting (4 − 3 = 1) is close for small numbers but drifts as they get bigger.

Use the inflation figure from an official statistics source for the period and the prices that matter to you. The number in the headline may not match your own spending (our guide to inflation and purchasing power explains how it is measured), for instance if rent or fuel make up a bigger share of your budget than average.

What reaches your account

A raise is a gross number. If tax and other deductions on the extra pay come to 20% in total, the $1,820 raise adds 1,820 × 0.80 = $1,456 a year to take-home pay, about $121 a month. Before deductions, the same raise is $1,820 ÷ 12 = $151.67 a month, or $70.00 on each of 26 biweekly paychecks. Your own rate depends on your tax rules and deductions, which gross pay versus take-home pay explains.

To see what a new salary means per hour, use the salary to hourly calculator.

These examples are illustrations, not financial, tax or career advice. Check your own contract, tax rules and inflation data.