How to Calculate a Pay Raise (and What Counts as a Good One)
Money guide · Updated June 2026
A pay raise is one of the few numbers worth checking twice. "We're giving you a 4% rise" sounds generous until you work out it's £40 a month after tax, or that prices rose faster than your pay did over the same year. Calculating a raise properly means three things: getting the percentage right, turning that percentage into money you can actually spend, and judging it against the cost of living. This guide does all three with plain examples. To run your own figures as you read, the salary increase calculator gives you the percentage and the new salary in one step.
Step 1: the percentage of the raise
A raise is just a percentage increase on your current pay. Take the difference between new and old, divide by the old figure, and multiply by 100.
Example. Your salary goes from £30,000 to £31,500.
- Difference: £31,500 − £30,000 = £1,500
- £1,500 ÷ £30,000 = 0.05 = a 5% raise
The key word is old: you divide by what you used to earn, because that's the baseline the increase is measured from. This is the same maths as any percentage increase. Going the other way is just as common — if you're told the percentage and want the new salary, the percentage change calculator works in either direction.
Step 2: turn the percentage into real money
A percentage is abstract; a monthly figure is not. To feel a raise, break it down to the unit you're paid in.
Example. That 5% on £30,000 is £1,500 a year. Spread it out:
- Per month: £1,500 ÷ 12 = £125
- Per week: £1,500 ÷ 52 ≈ £28.85
- Per hour (40-hr week): £1,500 ÷ 2,080 ≈ £0.72
If you're paid hourly, converting your new salary to an hourly rate is the clearest way to see the change — the salary to hourly calculator handles the 2,080-hour conversion for you and lets you adjust for part-time hours.
The take-home catch: a raise is taxed at your marginal rate — the band your top pound falls in — not your average rate. So a 5% gross raise never lands as a full 5% in your account. The headline percentage is real, but the money that reaches you is smaller, and the higher your earnings, the wider that gap.
Step 3: compare it to inflation
This is the step most people skip, and it's the one that decides whether a raise is actually a raise. If prices rose 3% over the year and your pay rose 5%, your real increase — your gain in spending power — is roughly 2%. If prices rose 6% and your pay rose 5%, you are worse off than before, even though the number on your payslip went up. A simple subtraction tells the story: real raise ≈ your raise − inflation. Always ask what a "good" raise is relative to, not in isolation.
So what counts as a good raise?
| Type of raise | Typical range |
|---|---|
| Standard cost-of-living / merit | 3–5% |
| Strong performance review | 5–8% |
| Promotion | 10–15% |
| Moving to a new employer | 10–20%+ |
These are rules of thumb, not promises — they vary by industry, country, and economy. The one firm rule is the inflation floor: a raise below inflation is a pay cut, however it's dressed up. Anything comfortably above it, plus recognition of more responsibility, is a genuinely good outcome.
The compounding angle
One reason small raises matter more than they look: they compound. A 4% raise this year becomes the base for next year's, so steady increases stack like interest. Over a decade, the difference between averaging 3% and 5% a year is enormous — the same maths that drives the compound interest calculator. It's why negotiating an extra point or two now pays off for years, not just one payslip.
The quick version
Divide the increase by your old pay for the percentage, break that down to a monthly figure to see what it really means, subtract inflation to find your true gain, and remember the headline number shrinks after tax. Run the numbers in the salary increase calculator and you'll know exactly where you stand before you say yes.
Frequently asked questions
How do I calculate the percentage of my pay rise?
Subtract your old pay from your new pay, divide the difference by your old pay, and multiply by 100. If you went from £30,000 to £31,500, that's £1,500 ÷ £30,000 × 100 = a 5% rise. Always divide by the old figure, not the new one.
What counts as a good pay raise?
The honest benchmark is inflation. A rise that beats the current inflation rate increases your real spending power; one below it is a pay cut in disguise, even though the number went up. A typical merit increase sits around 3–5%, while a promotion or a job move often brings 10–20%.
Why is my take-home increase smaller than my raise?
Because a raise is taxed at your marginal rate, not your average one. Each extra pound sits in your highest tax band, so a 5% gross rise lands as a smaller percentage in your bank account once income tax and national insurance take their share.
How do I turn an annual raise into an hourly figure?
Divide the new annual salary by the hours you work in a year — for a standard full-time job that's roughly 2,080 hours (40 hours × 52 weeks). A £2,000 raise on a 40-hour week is about £0.96 more per hour before tax.
Is a flat-amount raise better than a percentage one?
It depends on your current pay. A flat £1,500 is a bigger percentage for a lower earner than a higher one, so flat raises compress pay gaps. A percentage raise preserves them. Neither is automatically fairer — it depends on what the increase is meant to reward.