Pay Raise Calculator

A raise below inflation is a pay cut

A 3 percent increase in a year of 5 percent inflation is a 2 percent reduction in purchasing power. The nominal figure rises and what it buys falls. This is the first calculation to run on any offer, and it is routinely skipped because the number on the letter went up.

Percentage and absolute tell different stories

Five percent on 40,000 is 2,000; five percent on 100,000 is 5,000. Comparing raises across pay levels requires the percentage, but budgeting requires the absolute figure after tax — and at a higher marginal rate, more of the increase is withheld, so the take-home rise is a smaller percentage than the gross one.

Compounding makes early raises decisive

Every future raise is a percentage of the current salary, so a larger increase now raises the base for everything after it. A 10,000 difference at 25, growing 3 percent annually, compounds to a substantially larger gap by 45 and a far larger one in pension contributions, which are usually a percentage of salary. The single most valuable negotiation is the earliest one.

Promotions and merit increases are different negotiations

An annual merit increase typically runs 2 to 5 percent and tracks inflation and performance. A promotion carries a band change and can be 10 to 20 percent. A competing external offer is frequently the largest single jump, which is the uncomfortable reason changing employer has historically outpaced internal progression — internal increases are constrained by a budget pool, external ones by the market.

Check the total package, not the salary line

A 5 percent salary rise with a reduced bonus target, a higher health premium or a lower pension match can be flat or negative overall. Employer contributions and benefits routinely add 20 to 40 percent to compensation, so the comparison that matters is total package to total package.

A raise on a lower base is worth less than it looks

Percentage increases from a below-market starting point never close the gap, because each rise is calculated on the deficit. Correcting a below-market salary needs a level adjustment, not a larger percentage, and asking for the former is a different conversation from asking for the latter.

Related tools

• Compound Interest Calculator — Project how savings or investments grow with compound interest and regular contributions, in both nominal and inflation-adjusted terms.
• Mortgage Calculator — Calculate mortgage payments from price, deposit, rate and term, with total interest, amortisation and the costs beyond principal and interest.
• EMI Calculator — Calculate equated monthly instalments for a loan, with total interest, amortisation breakdown and the effect of prepayment.
• Paycheck / Salary Calculator — Work out net pay per paycheck after tax and deductions, including the extra-paycheck months.