How to calculate your salary increase percentage

Your appraisal letter gives a new salary but not the percentage, or a percentage but not the new figure. Either way, a few lines of arithmetic tell you what the raise is really worth, and whether it keeps up with prices.

Raise as a percentage

Subtract the old salary from the new one, divide by the old salary, and multiply by 100.

Example: 42,000 to 46,200. The increase is 4,200. 4,200 ÷ 42,000 = 0.10, so the raise is 10%.

The Percentage Calculator does this in its % change mode: enter the old and new salary.

New salary from a percentage

Multiply the old salary by (1 + raise). A 6% raise on 38,500 is 38,500 × 1.06 = 40,810. The same calculator's Add / subtract % mode does it directly.

Compare it with inflation

A raise only increases what you can buy if it beats inflation. The exact calculation is:

Real raise = (1 + raise) ÷ (1 + inflation) − 1

With a 10% raise and 4% inflation: 1.10 ÷ 1.04 − 1 = 5.8%. Simply subtracting, 10 − 4 = 6, is close enough for small numbers but overstates it slightly. With a 3% raise and 4% inflation, your real pay has fallen by about 1%, even though the number on the payslip went up.

Use the inflation figure for the same period as the raise, usually the last twelve months, from your national statistics office.

Per month and per hour

A yearly figure is hard to feel. The Salary Calculator converts between yearly, monthly, weekly, daily and hourly pay using your hours per week. A raise from 42,000 to 46,200 is 350 more per month before tax, and at 37.5 hours a week about 2.15 more per hour.

After tax

The raise you see in your bank account is smaller than the gross figure, and how much smaller depends on your tax band. If the raise pushes part of your income into a higher band, only the part above the threshold is taxed at the higher rate; the rest of your salary is not affected. The Take-Home Pay Calculator shows take-home pay before and after for the UK, Canada, Australia and India: run it twice and subtract.

Things that change the comparison

• Bonuses and allowances. Compare base salary with base salary, and treat one-off bonuses separately.
• Pension contributions calculated as a percentage of salary rise with it, reducing take-home pay slightly while increasing savings.
• Hours. A raise that comes with longer hours may be a pay cut per hour. Compare hourly rates.
• Timing. A raise from mid-year only affects half of this year's income.

Back-calculating an old salary

If you know the new salary and the percentage, divide rather than subtract: 46,200 ÷ 1.10 = 42,000. Taking 10% off 46,200 gives 41,580, which is wrong. The guide to reverse percentages explains why.