How to Calculate Your Pay Increase Percentage
Learn to quantify your career growth. Understand how to measure pay changes and project their impact on your financial future.
Understanding how to calculate a pay increase percentage is a valuable skill for managing personal finances and assessing career progression. This helps individuals evaluate the impact of a raise or new job offer on their financial standing.
The Core Formula for Percentage Increase
A percentage increase quantifies the relative change between an initial value and a larger subsequent value. It expresses this change as a proportion of the original value, multiplied by 100. The general formula involves two components: “new value” and “old value.”
The calculation begins by finding the difference between the new value and the old value. This difference represents the absolute increase, which is then divided by the old value. The resulting decimal is multiplied by 100 to become a percentage.
Calculating Your Pay Increase Percentage
To calculate your pay increase percentage, use your old salary or hourly wage as the “old value” and your new pay as the “new value.” First, subtract your old pay from your new pay to determine the raise amount.
Next, divide this raise amount by your old pay. This yields a decimal representing the proportion of your old pay that the raise constitutes. Multiply the resulting decimal by 100 to express this as a percentage.
For example, if your old annual salary was $50,000 and your new annual salary is $53,000, the raise amount is $3,000. Dividing $3,000 by $50,000 gives 0.06, resulting in a 6% pay increase.
If your hourly wage was $20 and it increased to $22, the raise is $2 per hour. Dividing $2 by $20 results in 0.10. Multiplying 0.10 by 100 indicates a 10% hourly pay increase.
Determining Your New Pay
Inversely, you might need to determine your new pay after a specific percentage increase from your current earnings. This is useful for understanding the dollar amount of a proposed raise.
To do this, convert the percentage increase into a decimal by dividing it by 100. A 5% increase becomes 0.05.
Next, multiply your current pay by this decimal to find the raise amount. Finally, add this raise amount to your current pay to arrive at your new total pay.
For example, if your current annual salary is $60,000 and you are offered a 4% raise, convert 4% to 0.04. Multiplying $60,000 by 0.04 yields $2,400, the dollar amount of your raise. Adding $2,400 to your current $60,000 salary results in a new annual salary of $62,400.