Salary Hike Calculator — Percentage, Real Terms and Offers
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The Percentage Is Easy. The Base Is the Argument.
Hike % = (New salary − Old salary) ÷ Old salary × 100 New salary = Old salary × (1 + Hike % ÷ 100)
Going from 60,000 to 66,000 is (66,000 − 60,000) ÷ 60,000 × 100 = 10%. Nobody disputes that arithmetic. What people dispute is which pair of numbers goes into it, because a single raise can honestly be described as several different percentages depending on the base chosen.
| Base | What it includes | Who prefers quoting it |
|---|---|---|
| Total package or CTC | Salary plus employer contributions, allowances, insurance, sometimes a notional bonus | The employer — it is the largest number |
| Gross salary | Contractual pay before tax and deductions | Recruiters and most published benchmarks |
| Take-home pay | What actually reaches your account | You, when budgeting |
A raise applied only to the fixed component of a package produces a smaller percentage on gross salary than on the headline total. And a gross increase does not translate into the same percentage in your account: if the raise pushes part of your income into a higher tax band, the take-home increase is a smaller proportion than the gross one.
The practical rule is to compare like with like. When someone quotes a percentage, establish the base before agreeing or being impressed by it. Our income tax calculator converts a gross increase into a take-home one.
A Raise Below Inflation Is a Pay Cut
A nominal increase says what happened to the number on your contract. A real increase says what happened to what it buys, and only the second is a raise in any sense that matters.
Real increase % = ((1 + nominal ÷ 100) ÷ (1 + inflation ÷ 100) − 1) × 100
An 8% raise in a year of 6% inflation is not a 2% real increase; it is about 1.9%, because the two percentages compound rather than subtract. Close enough that subtracting is a reasonable mental shortcut, and worth knowing that the shortcut always slightly overstates the gain.
The uncomfortable version of the same arithmetic: a 3% raise against 5% inflation is a real decrease of about 1.9%. The contract says you earn more and you can buy less. This is the calculation to run before deciding whether an offer is acceptable, and it is the one most people skip.
Percentages Do Not Reverse
A detail that catches people out in restructurings and in negotiations about deferred increases. A 20% cut followed by a 20% rise does not restore the original salary.
60,000 × 0.80 = 48,000 48,000 × 1.20 = 57,600
The 20% came off a larger base than it went back on to, leaving a permanent 4% gap. Restoring 48,000 to 60,000 requires a 25% rise, not a 20% one. The same asymmetry applies to any pair of equal-sized percentage moves in opposite directions.
Small Differences Compound Into Large Ones
Each raise is calculated on the salary the previous one produced, which makes early increases disproportionately valuable.
| Starting at 50,000 | After 5 years | After 10 years |
|---|---|---|
| 3% annually | about 57,964 | about 67,196 |
| 5% annually | about 63,814 | about 81,445 |
Two percentage points a year separates those two people by more than 14,000 in annual salary after a decade, and by considerably more in total earnings across it. It is also why accepting a low starting salary is expensive in a way that is invisible at the time: every subsequent percentage is applied to a smaller number.
Comparing a Raise Against Changing Jobs
A external offer is usually quoted as a larger percentage than an internal raise, and comparing the two on the headline figure alone is how people end up worse off.
| Factor | Question to answer before deciding |
|---|---|
| Base versus package | Is the new figure on the same basis as your current one? |
| Pension and benefits | Does the employer contribution differ, and by how much in cash terms? |
| Unvested equity or bonus | What are you forfeiting by leaving before it lands? |
| Commute and location | What does the change cost in fare, fuel and hours per week? |
| Notice and probation | How long until the new role is secure, and what happens if it is not? |
None of these argues against moving. They argue for pricing the whole package rather than one percentage, because a 25% offer that removes a strong pension contribution and adds an hour of daily commuting can be worth less than a 10% internal raise.
For the travel line specifically, our fuel cost calculator turns a longer commute into an annual figure you can subtract from the offer.
Using the Number in a Conversation
Knowing the arithmetic changes how the discussion goes, mostly by making it specific.
- Ask for a figure rather than a percentage. Percentages invite ambiguity about the base; an amount does not.
- Bring the real-terms calculation. "That is a 1.9% increase after inflation" is a factual statement, not a complaint, and it reframes an offer that sounded reasonable.
- Where the budget genuinely will not move, ask what will — timing of the next review, title, a training budget, or additional pension contribution, which is often funded from a different line.
- Get the effective date in writing. A raise agreed in March and applied in July is materially smaller in that year than it appears.