Pay Raise Calculator

How to calculate a raise

A raise can be written three ways, and the calculator takes any of them:

• As a percent: new pay = old pay × (1 + raise). A 5% raise on $20 an hour is $20 × 1.05 = $21.
• As an amount: new pay = old pay + raise. $250 more a month on $4,000 is $4,250, a raise of 6.25%.
• As the new pay: raise = new pay ÷ old pay − 1. From $18.00 to $19.50 an hour is 8.33%.

The result converts the new pay into every pay period. An hourly rate becomes weekly pay at your hours per week, then 52 weeks a year; a salary becomes biweekly pay over 26 paychecks, semimonthly over 24 and monthly over 12. These are the same conventions payroll uses for a steady schedule. To switch between an hourly rate and a salary with unpaid time off or overtime, use the hourly to salary calculator.

The raise in every pay period

These are gross figures. The raise is taxed at your top income tax rate, plus 7.65% for Social Security and Medicare, so the change in take-home pay is smaller than the table shows. If you work overtime, the higher rate also raises your overtime pay, at 1.5 times the new rate; the overtime calculator shows how much.

What a raise is worth after inflation

A raise only increases what you can buy if it beats price increases over the same period. The real raise is:

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

A 5% raise in a year when prices rose 3% is (1.05 ÷ 1.03) − 1 = 1.94%. A 2% raise in the same year is a real pay cut of about 1%. The usual measure of inflation is the 12-month change in the Consumer Price Index, published monthly by the Bureau of Labor Statistics. Enter it under More options to see the real raise; for the arithmetic of percent changes in general, the percentage calculator does any percent increase or decrease.

Raises that start mid-year

A raise effective July 1 adds only half of the annual increase to this calendar year’s earnings: $2,080 a year becomes $1,040 for the rest of the year. Set Raise starts in to the month of your first paycheck at the new rate. This matters for budgets and for the W-2 at the end of the year, which will show a total between the old and new salary.

Raises over several years

Percent raises compound, because each one is applied to the pay after the last. Three percent a year for 10 years is 1.03¹⁰ = 1.344, a 34.4% increase, not 30%. Flat-dollar raises do not compound: $1 more an hour each year is the same $2,080 a year every time, so it is a smaller and smaller percentage of a growing wage. When comparing two offers — a percent raise and a fixed amount — enter each one here and compare the yearly increase.

A raise or a one-time bonus

A bonus is paid once; a raise is paid every year after it, and future percent raises build on it. On a $60,000 salary, a 3% raise is $1,800 a year — $9,000 over five years if nothing else changes — while a $2,000 bonus is $2,000 once. The bonus wins only in the first year. Bonuses are also often taxed through withholding at a flat supplemental rate, so the first paycheck that includes one can look different from the raise you expected, even though the total tax for the year works out the same way.

Retirement contributions set as a percentage of pay grow with a raise too: 6% of $60,000 is $3,600 a year, and 6% of $61,800 is $3,708. If your employer matches contributions, the match rises with the raise as well.

Percent or amount

For the same budget, a percent raise gives more dollars to higher-paid employees, while an equal-dollar raise gives the same dollars to everyone and a bigger percentage to lower-paid workers. A 3% raise is $1,200 on $40,000 and $3,000 on $100,000; a $2,000 raise is 5% and 2% of the same salaries. Either way, compare the new pay against your weekly hours with the work hours calculator if your schedule changes along with the raise.