Pay Raise Calculator

A raise arrives as one number, usually a percentage, and it is not obvious what it means. This works out the new figure across every pay period, the extra cash it puts in your account, and whether it keeps up with prices.

The arithmetic

new pay = current pay × (1 + raise ÷ 100)

A $60,000 salary with a 4% raise becomes $60,000 × 1.04 = $62,400. The increase is $2,400 a year, which is $200 a month or about $92 a fortnight before tax.

Going the other way, from two salaries to a percentage:

raise = (new pay - old pay) ÷ old pay × 100

Moving from $58,000 to $61,000 is $3,000 ÷ $58,000 = 5.17%. Dividing by the new figure instead of the old one is the usual slip and understates the raise.

The same raise in different units

Percentages scale, so the raise is identical whichever period you look at. Seeing it stated four ways is still useful, because a $200 monthly increase and a $2,400 annual one land very differently.

Period	Before	After	Difference
Year	$60,000	$62,400	$2,400
Month	$5,000	$5,200	$200
Two weeks	$2,307.69	$2,400	$92.31
Week	$1,153.85	$1,200	$46.15
Hour (40h)	$28.85	$30.00	$1.15

Hourly figures use 52 weeks. Two-weekly pay uses 26 periods a year, which is why a fortnightly amount is not half a monthly one.

The raise after inflation

This is the number that decides whether the raise is worth anything. Subtracting inflation from the raise is close but not right; the correct version divides:

real raise = (1 + raise) ÷ (1 + inflation) - 1

A 4% raise with 3% inflation gives 1.04 ÷ 1.03 - 1 = 0.97%, slightly under the 1% that subtraction suggests. The gap is small at low rates and grows as both numbers rise.

Where it matters is the sign. A 4% raise against 6% inflation is -1.89%. The salary went up and your buying power went down, which is why "we gave everyone 4%" and "everyone got poorer" can both be true in the same year.

Why a small difference compounds

Raises stack, so the gap between two career paths widens far more than the annual difference suggests.

Years	3% a year	5% a year	Gap
Start	$60,000	$60,000	$0
5	$69,557	$76,577	$7,020
10	$80,635	$97,734	$17,099
20	$108,367	$159,198	$50,831

Two percentage points a year becomes a $50,000 annual difference after twenty years, and that is before counting the extra pension contributions the higher salary attracts. It is also why a starting salary matters more than it seems: every future raise is a percentage of it.

What actually reaches your account

The raise is quoted gross, and the increase is taxed at your marginal rate rather than your average one, so the take-home increase is smaller than the headline. A $2,400 raise for someone in a 30% marginal band adds about $1,680 after income tax, less again after social contributions.

Pension contributions usually rise with the salary too, which reduces the immediate cash while adding to the pot. That is a transfer rather than a loss, though it does explain why a 4% raise rarely feels like 4% on payday.

Cost of living against merit

Employers often run two separate things. A cost-of-living adjustment applies to everyone and is meant to hold buying power steady. A merit increase reflects performance and is what actually moves you forward. A 3% offer that turns out to be entirely cost of living in a 3% inflation year is a raise of zero in real terms, and it is a fair question to ask which of the two you are being given.

Hourly raises

The arithmetic is identical, and the small numbers hide how large the percentage is. An increase from $18.00 to $19.50 an hour is $1.50 ÷ $18.00 = 8.33%, a strong raise by any standard.

Annualised at 40 hours a week over 52 weeks, that $1.50 is $3,120 a year. Hourly workers are often quoted the increase in cents and rarely in percent, which makes a good raise sound small and a poor one sound acceptable. Converting to both is the quickest way to judge an offer.

Judging a counter-offer

Moving jobs is where the largest single increases happen, since a new employer prices the role at market rather than adjusting an existing salary. Going from $45,000 to $52,000 is a 15.56% increase, which would take five years of 3% raises to reach.

Worth weighing against that: the pension you are leaving, unvested equity, notice periods, and the fact that a new job restarts the clock on any tenure-based benefit. The percentage is the headline and rarely the whole comparison.

The cost of no raise at all

A frozen salary is not a flat outcome, because prices keep moving. Three years without an increase at 3% inflation leaves buying power at 91.5% of where it started, a real cut of 8.5%.

Stated that way it becomes a concrete number to raise in a review, rather than a feeling that things are tighter. The same calculation is what turns a "generous" 2% offer in a 5% inflation year into a straightforward pay cut of 2.86%.

Timing and pro-rating

A raise granted partway through the year is worth less in that year than the annual figure suggests. A 4% increase on $60,000 effective in October delivers $2,400 × 3÷12 = $600 in the calendar year, and the full $2,400 only from the following January.

This matters when comparing two offers with different start dates, and it matters for backdated raises, where the arrears are usually paid as a lump sum and taxed in the month they arrive rather than spread across the period they cover.

The rest of the package

Salary is the part that gets negotiated and often not the part that moves most. A 4% raise on $60,000 is $2,400. An employer pension contribution rising from 5% to 8% of salary is worth $1,800 a year and never appears on a payslip.

Things worth pricing before comparing two offers: employer pension contribution, health cover, bonus structure and how reliably it pays, holiday allowance, and any equity along with its vesting schedule. Five extra days of holiday on a $60,000 salary is roughly $1,154 of time, which is close to half the raise in the example above.

None of that argues against pushing on base salary, since base is what future raises are calculated from and what a new employer will ask about. It does mean an offer with a lower salary is not automatically the worse one.

Raises and the pay band

Most structured employers place each role in a band with a floor, a midpoint and a ceiling, and where you sit inside it quietly governs what you can be offered. Someone near the floor can be moved up sharply without approval; someone near the ceiling often cannot be given more than an inflation adjustment whatever their performance.

That is worth knowing before a review, because a refusal is sometimes structural rather than a judgement on the work. Where it is structural, the conversation that changes the outcome is about moving to a different band, not about a larger percentage inside the current one.

Common mistakes

Dividing by the new salary. The percentage increase is measured against what you were earning before.

Subtracting inflation instead of dividing. Close at small numbers, meaningfully wrong at large ones.

Comparing a monthly figure to a fortnightly one. There are 26 fortnights and 12 months in a year, so the two never line up.

Reading the gross increase as spending money. Tax and contributions take a share, and the marginal rate on the raise is higher than your average rate.