How to Calculate a Pay Raise (and Whether It Beats Inflation)

Published October 12, 2026

Free tool: Pay Raise Calculator→

A raise sounds great as a percentage, but what does it mean for each paycheck, and does it actually increase your buying power once inflation is taken into account? This guide shows how to calculate both, using the free Pay Raise Calculator.

Calculating your new pay

New pay = current pay × (1 + raise %)

Example: a $60,000 salary with a 5% raise:

• New salary: $63,000, up $3,000 a year before tax
• Per month: $5,250, up $250
• Every two weeks: $2,423.08, up $115.38
• Hourly (40 hours a week): $30.29, up from $28.85

Finding the raise percentage

If you're given a new amount instead, divide:

Raise % = new pay ÷ old pay − 1

An hourly worker going from $25 to $26.50 gets a 6% raise: from $52,000 to $55,120 a year at 40 hours a week. For converting between hourly and yearly pay, see How to Convert Salary to Hourly.

Your real raise after inflation

Inflation erodes what your pay buys, so the raise that matters is the real raise:

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

• A 5% raise with 3% inflation is a real raise of 1.94%.
• A 2% raise with 3% inflation is a pay cut in real terms of about 0.97%.

Over time it adds up: 5% raises every year for 10 years take $60,000 to about $97,734, while keeping pace with 3% inflation would only need $80,635.

Negotiating a raise

• Know your market value from salary surveys and job listings.
• Bring evidence of results and added responsibilities.
• Think in total compensation: bonuses, retirement matching, benefits and flexibility matter too.
• Remember taxes: a raise is taxed at your marginal rate, so take-home pay rises by less than the gross amount. Moving into a higher bracket doesn't shrink your take-home pay, because only the extra income is taxed at the higher rate.

To see how inflation affects savings and prices, see How Inflation Affects Your Money.

How to use the Pay Raise Calculator

1. Open the Pay Raise Calculator.
2. Enter your current pay and how often you're paid, from hourly to yearly, and your hours per week.
3. Enter the raise as a percentage, a dollar amount or your new pay.
4. Enter the inflation rate to see your real raise.
5. Read the results: your new yearly pay, the change per month, your new hourly rate and your real raise after inflation, with charts of pay before and after and over 10 years, plus a table for every pay period.

Frequently asked questions

How do I calculate a 5% raise?

Multiply your pay by 1.05. On $60,000, that's $63,000, or $3,000 more a year.

How do I calculate a raise percentage?

Divide the new pay by the old pay and subtract 1. Going from $25 to $26.50 an hour is a 6% raise.

Does a 3% raise keep up with inflation?

Only if inflation is 3% or less. Your real raise is (1 + raise) ÷ (1 + inflation) − 1, so a 3% raise with 3% inflation leaves your buying power unchanged.