Pay Raise Calculator
A rise below inflation is a pay cut in everything but name. The number on the letter goes up and what it buys goes down.
New salary
$62,400.00
- New salary
- $62,400.00
- Increase
- $2,400.00
- Rise
- 4.00%
- More each month
- $200.00
- After inflation
- 1.00%
- Worth in today's money
- $60,600.00
- After inflation this is worth 1.00% in real terms — $600.00 of genuine increase.
- A rise compounds against every future one, because the next percentage is taken on the new figure. That is why an extra point now is worth far more than it looks over a career.
- The percentage is calculated on the gross salary. What reaches your account depends on tax, and a rise that crosses a threshold delivers less than the percentage suggests.
About pay rises
The arithmetic is trivial and the framing is not. A 4% rise on $60,000 is $2,400 more a year, or $200 a month before tax. Against 3% inflation it is a real-terms increase of 1%, worth $600 in today's money.
That distinction is the whole point of this page. Most people evaluate a rise against zero and feel pleased; the honest comparison is against inflation, because that is the rate at which standing still costs money. A 2% rise in a 4% inflation year is a 2% pay cut, and it does not feel like one until the year is over.
The other thing worth understanding is compounding. Every future rise is a percentage of the new figure, so an extra point now is not worth a point — it is worth a point on every year that follows. Over a twenty-year career the difference between averaging 3% and 4% is enormous, which is why the rise you negotiate at the start of a job matters more than any single one after it.
The percentage is on gross salary. What reaches your account depends on tax, and a rise that pushes you across a threshold delivers less than the headline suggests — though only on the part above the threshold, not on the whole salary, which is the most persistent misunderstanding in personal finance.
What it works out
- New salary from a percentage, or the percentage from a new salary
- The increase in money, annually and monthly
- What it is worth after inflation
The formula
New = Current × (1 + Rise) Real terms = Rise − Inflation
$60,000 × 1.04 is $62,400 — an increase of $2,400, or $200 a month.
Subtracting inflation gives the real-terms figure. A 4% rise against 3% inflation is 1% in real terms, so the new salary is worth $60,600 in today's money rather than $62,400. You are better off, by $600 rather than $2,400.
Going the other way, if you know the new figure the percentage is (new − current) ÷ current. $66,000 from $60,000 is $6,000 over $60,000, which is 10%.
The compounding point is worth doing the arithmetic on. $60,000 growing at 3% for twenty years reaches about $108,000; at 4% it reaches about $131,000. One percentage point, sustained, is worth $23,000 a year by the end — which is the argument for negotiating hard early rather than hoping to catch up later.
- Current
- Gross salary before the rise.
- Rise
- The percentage increase.
- Inflation
- For the real-terms comparison. Your own figure — nothing is published here.
A worked example
A 4% rise on $60,000, in a year with 3% inflation.
That works out to $62,400.00 .
- New salary
- $62,400.00
- Increase
- $2,400.00
- Rise
- 4.00%
- More each month
- $200.00
- After inflation
- 1.00%
- Worth in today's money
- $60,600.00
Questions
How do I calculate a pay rise percentage?
Subtract the old salary from the new one and divide by the old. $66,000 from $60,000 is $6,000 over $60,000, which is 10%.
What is a good pay rise?
Above inflation, at minimum — anything below it is a real-terms cut. Beyond that it depends on the market and on whether you have taken on more, and a rise that merely tracks inflation is not a reward for anything.
Is a 3% rise good?
Only relative to inflation. At 2% inflation it is a real increase; at 5% it is a 2% cut. The headline number on its own says nothing at all.
How much does one extra percent matter?
Far more than it looks, because every future rise compounds on the new figure. $60,000 at 3% for twenty years reaches about $108,000; at 4% it reaches about $131,000.
Will a rise push me into a higher tax bracket and cost me money?
No. Higher rates apply only to the part of income above the threshold, not to the whole salary, so a rise always leaves you with more. It is the most persistent misunderstanding in personal finance.
How does a rise affect my monthly pay?
Divide the annual increase by twelve — $2,400 is $200 a month gross. After tax it will be less, by your marginal rate rather than your average one.
Should I ask for a percentage or a figure?
A figure, usually. A specific number anchored to market data is harder to negotiate down than a percentage, and it moves the conversation from what you currently earn to what the role is worth.