Pay Raise Calculator
Calculate a new salary from a percentage raise, or the percentage a new offer represents — and whether it beats inflation in real terms.
How to use this calculator
- 1Enter your current salary.
- 2Enter whichever you know: the percentage, the new figure, or the raise amount.
- 3Set the inflation rate for your country to see whether the raise is real or nominal.
How the calculation works
New = Current × (1 + r) Real change ≈ r − inflation- r
- Raise as a decimal
- Real change
- The increase in purchasing power
The exact real change is (1 + r) / (1 + i) − 1. Subtracting the rates is a very close approximation at ordinary rates and is what most people use.
A raise expressed as an amount converts to a percentage by dividing by the current salary — the base is always the old figure, not the new one.
Worked example
A 4% raise on $65,000 with 3% inflation
- 1.New salary = 65,000 × 1.04 = $67,600.
- 2.The raise is $2,600 a year, or about $216.67 per monthly pay period before tax.
- 3.With 3% inflation the real increase is roughly 1%, worth about $650 a year in today’s purchasing power.
Result: $67,600 — a real increase of about 1%
What counts as a raise
A raise is an increase to base pay, usually expressed as a percentage of the previous salary. The percentage matters more than the dollar figure, because it’s what determines how the increase compares to inflation, to a market rate, or to raises received by peers — a $3,000 raise is generous on a $40,000 salary and modest on a $150,000 one.
Raises are distinct from one-off bonuses. A bonus is paid once and doesn’t change the ongoing salary; a raise compounds, because every future raise — and often every benefit tied to salary, like retirement contributions — is calculated from the new, higher base.
Why raises happen
Employers grant raises for different reasons, and knowing which kind is on offer changes how to interpret it.
- Merit increase — tied to individual performance, typically decided during an annual review cycle.
- Cost-of-living adjustment — intended to offset inflation and keep purchasing power roughly flat, not to reward performance.
- Promotion increase — accompanies a change in role or level, usually the largest single jump most people see.
- Market adjustment — brings a below-market salary in line with what the role currently commands, often triggered by a pay-equity review or difficulty retaining staff.
- Retention raise — offered specifically to keep someone who might otherwise leave, often in response to an outside offer.
Nominal versus real: the number that actually matters
A raise’s nominal percentage is what’s printed on the letter; its real value is what remains after subtracting inflation. A 3% raise in a year when prices rose 4% is a real-terms pay cut — the paycheck is bigger, but it buys less than it did a year ago. This gap is easy to miss, because the nominal number always looks positive.
Comparing a raise to inflation over the whole period it applies to, rather than just the moment it takes effect, gives a clearer picture: prices measured over a full year capture the actual erosion in purchasing power the raise needs to outrun.
Timing and preparing to ask
Raises are rarely handed out purely on schedule — timing and preparation influence the outcome as much as performance does.
- 1Research the market rate — for the role and experience level, using recent, comparable data rather than outdated figures.
- 2Document contributions — specific results since the last increase, ideally with measurable outcomes rather than general effort.
- 3Time the request — around a natural moment — a review cycle, the completion of a major project, or a change in scope — rather than an arbitrary date.
- 4Ask for a specific number — or range, rather than an open-ended increase, anchored to the research already done.
- 5Have a fallback ready — non-salary compensation such as bonus, equity or flexibility, in case the base-salary number has limited room to move.
Why small raises compound into large differences
Because each raise is calculated on the current salary, the effect compounds the same way interest does. Two people starting at the same salary but receiving 3% versus 5% raises every year will see the gap between their incomes widen every single year, not stay fixed — a difference that becomes substantial over a decade or more. It’s part of why a below-market raise early in a career can be costly well beyond the paycheck it first affects.
What this assumes, and where it stops
Assumptions
- The raise applies to base salary only, with bonuses and benefits unchanged.
- Inflation is the figure you enter, applied over one year.
Limitations
- Tax is not applied. A raise that crosses a tax threshold delivers less net increase than the gross figure implies.
- Does not model changes to bonus targets, equity grants or pension contributions, which often move with base pay.
Common questions
Is a 3% raise good?
It depends entirely on inflation. In a year with 2% inflation, 3% is a modest real gain. In a year with 6% inflation it is a 3% pay cut in purchasing power. Always compare the raise against the inflation rate rather than judging the number alone.
How do I calculate the percentage of a raise I was offered?
Divide the increase by your current salary, then multiply by 100. A $3,000 raise on $65,000 is 3,000 ÷ 65,000 = 4.6%. Always divide by the old salary — dividing by the new one understates it.
Sources
- Employment cost index — US Bureau of Labor Statistics
Formula and content last reviewed on .
Results are estimates for information only, not professional advice.
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