Pay & Tax

Pay Raise Calculator

Percentage or amount, and what it is worth after inflation.

What it does. A raise below the inflation rate is a real-terms pay cut, however it is announced. If prices rose 4% and your pay rose 3%, you can buy less than you could a year ago — which is why the number worth looking at is the real change, not the headline percentage.

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How to use Pay Raise Calculator

Enter your current pay and the raise as a percentage or an amount.
Add the inflation rate for the period.
Read both the nominal and real change.

Nominal against real

The headline figure is nominal — the change in the number. The real change subtracts inflation and is what determines whether you are better off.

A 3% raise against 4% inflation is a real-terms cut of roughly 1%. It is still an increase in the number on the payslip, and it still buys less.

The approximation of simply subtracting is close enough at low rates. Precisely, the real increase is (1 + raise) ÷ (1 + inflation) − 1, which matters once either figure gets large.

Compounding, in both directions

Raises compound. A 3% raise every year for ten years is not 30% — it is about 34%, because each raise applies to the raised figure.

Missed raises compound too, which is why a year without one costs more than that year alone.

This is also why a starting salary matters more than it appears. Every future percentage raise is calculated from it, so a difference at the start widens for the whole time you stay.

Percentage or amount

A percentage scales with salary — the standard for annual reviews.
A flat amount is worth proportionally more to lower earners, which is sometimes the intent.
A promotion is usually a band change rather than a percentage.
A market adjustment corrects a gap and is separate from performance.
A one-off bonus is not a raise. It does not compound and it does not raise the base.

That last point is worth holding onto in a negotiation. A bonus equal to a raise is worth much less over any period longer than a year, because every future raise is calculated from an unchanged base.

Frequently asked questions

Is a 3% raise good?

It depends entirely on inflation. Against 2% inflation it is a real increase; against 4% it is a real-terms cut of about 1%. The nominal figure alone says nothing.

How do I calculate a raise percentage?

Divide the increase by the old salary and multiply by 100. A rise from 50,000 to 52,500 is 2,500 ÷ 50,000 = 5%.

Do raises compound?

Yes. 3% a year for ten years is about 34%, not 30%, because each raise applies to the already-raised figure. Missed raises compound against you the same way.

Is a bonus as good as a raise?

No, over any period longer than a year. A bonus does not raise your base, so it does not compound and every future percentage raise is calculated from the unchanged figure.

Why does a starting salary matter so much?

Because every future percentage raise is calculated from it. A gap at the start widens for as long as you stay, which is why the initial negotiation is worth more than it appears.