Salary increase percentage: two questions, one formula
People come to a salary increase calculator with one of two things in hand. Either they have an old figure and a new one and want the percentage, or they've been offered a percentage and want to know what hits the bank. It's the same equation solved for a different unknown, so this tool answers both instead of making you pick a page. The math is the same whether you're getting the raise or budgeting it for someone else.
The percentage is (new − old) ÷ old. Going from $50,000 to $55,000 gives 5,000 ÷ 50,000 = 0.10, a 10% increase. The other direction is old × (1 + percentage): $50,000 with a 10% raise becomes $55,000.
Guard the denominator. It's always the old salary, because a percentage increase measures growth from where you started. Divide the $5,000 gap by the new $55,000 and you get 9.09%. That answers a different question (what share of the new salary the raise is), and it always looks smaller. If a number in a review meeting seems oddly low, this is usually why.
Subtracting inflation from your raise gives the wrong number
Nearly every calculator that mentions inflation handles it by subtraction: a 10% raise minus 6% inflation equals a 4% real increase. It feels right and it's quick. It's also wrong.
Inflation doesn't take a slice off your salary. It divides what your salary buys. The two effects multiply instead of adding, and the real increase is:
(1 + raise) ÷ (1 + inflation) − 1
With a 10% raise and 6% inflation that's 1.10 ÷ 1.06 − 1 = 3.77%, not 4%. The gap is 0.23 percentage points. Small enough to shrug off, but your number will never match a correctly built one, and you won't know which to trust.
The error gets worse fast. At 40% inflation with a 45% raise, subtraction reports a 5% gain while the real figure is 1.45 ÷ 1.40 − 1 = 3.57%. Anyone who has lived through a high-inflation year knows the raise that beat the index on paper and felt like nothing. This is the arithmetic behind that.
A quick way to see it: suppose every price doubles and your salary doubles. Subtraction says 100% − 100% = 0%, and it happens to be right. Now suppose prices double and your salary rises 150%. Subtraction claims a 50% gain. But your salary is 2.5× and prices are 2×, so you can buy 2.5 ÷ 2 = 1.25× as much. That's a 25% gain, half what subtraction said. Subtraction was only ever right by accident, at the point where the numbers cancel.
This calculator shows both figures side by side on purpose. Hiding the wrong one teaches nobody anything. Put them next to each other, with the overstatement named, and you can see why your number and HR's spreadsheet disagree.
A raise below inflation is a pay cut
This is the most useful thing the tool tells you, and it says so in words as well as in color.
A 3% raise in a year when prices rose 6% is a real change of 1.03 ÷ 1.06 − 1 = −2.83%. More money comes in, and it buys less than last year's money did. On a $60,000 salary, 3% takes you to $61,800, while just standing still would have taken $63,600. You're $1,800 a year behind, in a meeting where everyone is calling it a raise.
There's nothing unusual or dishonest about that. Budgets are finite, and a below-inflation increase is often the most the employer can honestly give. But it changes what you should ask for, and whether "we gave you a raise" should end the discussion. The tool prints the salary that just holds your position, so you have a concrete floor to point to.
COLA, merit, market adjustment and promotion raises are different money
One percentage can mean four different things, and in a negotiation you can't swap one for another.
| Type | What it is | What it implies |
|---|---|---|
| Cost-of-living (COLA) | An across-the-board rise tied to an index | Keeps you level. It isn't a reward and shouldn't be counted as one. |
| Merit increase | Tied to your performance rating | The only one that reflects how you did. Often 2 to 5%, frequently pooled. |
| Market adjustment | Correcting a salary that fell behind the going rate | Closes an existing gap. It doesn't pay for future work. |
| Promotion increase | New title, new scope, new band | Should move you into a new range. A nudge inside the old one falls short. |
The difference matters because these get bundled. An offer of "6%" that turns out to be 3% COLA plus 3% merit in a year of 3.4% inflation is a real increase of about 2.5%, and a performance reward of roughly nothing after inflation. Ask which part is which before you decide whether the number is good.
It matters even more with a promotion. If you move up a level and get the same percentage as the whole team, you took on a bigger job for the cost of living. A promotion that doesn't clear the bottom of the new band gives you a title and no raise.
Two 5% raises are not a 10% salary increase
Raises compound, because each one applies to a salary the previous one already lifted. Two 5% increases in a row produce 10.25%: $1,000 becomes $1,050, then $1,102.50. Three of them give 15.76%, not 15%.
That works for you over time and against you when you piece history back together. To get your total growth over four years, don't add the four percentages. Multiply the growth factors, or put the first salary and the current one into the calculator and read the answer. When you compare a multi-year offer against a single-step one, compare final salaries, never summed percentages.
Inflation over several years works the same way. Three years of 5% inflation is a 15.76% rise in prices, so a salary that rose 15% over those three years lost ground, even though the two numbers look like a tie.
Hourly to annual salary needs your hours, not 2,080
Converting an hourly rate to a yearly salary is where quiet errors hide. The standard shortcut multiplies by 2,080 (40 hours a week times 52 weeks), and most tools apply it without telling you.
It breaks in two ordinary cases. If you work 20 hours a week, your annual figure is half what 2,080 gives: $25 an hour is $26,000, not $52,000. And if you're on a contract with no paid time off, you're likely paid for 48 or 50 weeks, not 52, so the 2,080 assumption overstates your year by 4% to 8%.
That's why weekly hours and weeks worked are visible inputs here, not constants buried in the code. The conversion doesn't touch the percentage: 10% is 10% whether you say it hourly or annually. The dollar difference per month and per year, though, depends entirely on getting the annual figure right.
A 10% gross raise is not a 10% net raise
Every figure in this calculator is gross, and the percentage that reaches your bank account is smaller than the one you negotiated. The offer isn't flawed. That's how a progressive tax system works.
Your raise sits on top of everything you already earn, so it's taxed at your marginal rate, the rate on the last dollar, while your existing salary was taxed at a blend of every lower band. Payroll taxes stack on the same money. If roughly 30% of a $5,000 gross raise goes to federal, state and payroll withholding, you keep about $3,500. Against take-home pay of $40,000, that's an 8.75% net raise from a 10% gross one.
One myth to kill while we're here: moving into a higher bracket never lowers your take-home pay. Only the income above the threshold is taxed at the higher rate. Turning down a raise to "stay in a lower bracket" costs money every time. What is true is that the net percentage lags the gross one, and it lags more the higher you earn. That's why the gross number is the one to negotiate.
Taking your salary increase numbers into a negotiation
Three numbers do most of the work. The salary that just matches inflation is your floor, and below it the offer is a real cut whatever it's called. The real increase after inflation is what you actually gained. The dollar difference per year is what you'll feel, and it's the figure to say out loud, because "1.5 points" is abstract and "$750 a year" isn't.
Everything is computed in your browser. No salary you type is uploaded, logged or stored. That matters more here than on most tools, since your pay is one of the few numbers you really aren't supposed to leak.
Frequently asked questions
How do I calculate the percentage increase between two salaries?
Subtract the old salary from the new one, divide by the old salary, then multiply by 100. Going from $50,000 to $55,000 is (55,000 − 50,000) ÷ 50,000 = 0.10, or 10%. Always divide by the OLD salary, never the new one. Dividing by the new figure is the most common slip, and it always understates the raise.
Why is a 10% raise with 6% inflation not a 4% real increase?
Inflation doesn't subtract from your salary. It divides what your salary buys. The real increase is (1 + raise) ÷ (1 + inflation) − 1, which for 10% and 6% is 1.10 ÷ 1.06 − 1 = 3.77%, not 4%. Plain subtraction overstates your gain by 0.23 percentage points here, and the error grows as inflation rises. At 40% inflation with a 45% raise, subtraction claims 5% while the real gain is 3.57%.
What raise do I need just to keep up with inflation?
Exactly the inflation rate, not a point less. If prices rose 3.4% over the year your review covers, a 3.4% raise leaves your purchasing power where it was: more dollars, same basket. Anything below that is a real pay cut. A 2% raise against 3.4% inflation is a real change of 1.02 ÷ 1.034 − 1 = −1.35%.
Do two 5% raises add up to a 10% increase?
No, they compound to 10.25%. The second raise applies to a salary the first one already lifted, so $1,000 becomes $1,050 and then $1,102.50. Three 5% raises in a row give 15.76%, not 15%. Adding percentages instead of multiplying the growth factors is the same kind of error as subtracting inflation.
Will a 10% gross raise increase my take-home pay by 10%?
No, it'll be less. The extra income sits on top of everything you already earn, so it's taxed at your marginal rate, which may be a higher bracket than your average rate. If a $5,000 gross raise loses about 30% to federal, state and payroll taxes, you keep roughly $3,500. Against take-home pay of $40,000, that's an 8.75% net raise, not 10%. Progressive brackets never leave you worse off after a raise, though. Only the income above each threshold is taxed at the higher rate.