How to Calculate Pay Raise Percentage
Whether you're negotiating a raise, evaluating a job offer, or calculating the real impact of an annual review, knowing how to calculate pay raise percentage is a valuable financial skill. The math is simple, but understanding what's actually worth celebrating takes context.
The Formula
Raise % = (New Salary − Old Salary) / Old Salary × 100
Step-by-Step Example
Your salary goes from $65,000 to $70,000.
Raise % = ($70,000 − $65,000) / $65,000 × 100 = $5,000 / $65,000 × 100 = 7.69%
Calculating New Salary from Raise Percentage
New Salary = Old Salary × (1 + Raise % / 100)
Example: $65,000 with a 5% raise: $65,000 × 1.05 = $68,250
What's a Good Raise?
| Raise % | Context |
|---|---|
| < 2% | Below inflation (real pay cut) |
| 2–3% | Typical cost-of-living adjustment |
| 4–6% | Good merit raise |
| 7–10% | Strong performance recognition |
| > 10% | Promotion or market correction |
Inflation Adjustment
A 3% raise sounds good, but if inflation is 4%, your real purchasing power declined by about 1%. Always compare your raise to the current inflation rate.
Compounding Effect Over Time
A 5% annual raise turns $60,000 into:
- After 5 years: $60,000 × 1.05⁵ = $76,577
- After 10 years: $60,000 × 1.05¹⁰ = $97,734
Use our pay raise calculator to see the exact impact of any raise.