The pay raise formula
A raise scales your salary up by a percentage. Going forward from a percent:
increase = current × raise%
new salary = current + increase
Going the other way — finding the percentage from two salaries:
raise% = ( new − old ) ÷ old × 100
Worked example
A $50,000 salary with a 5% raise:
Increase: $50,000 × 0.05 = $2,500.
New salary: $50,000 + $2,500 = $52,500.
Working backward from $50,000 to $52,500:
Raise %: ($52,500 − $50,000) ÷ $50,000 × 100 = 5%.
Real vs. nominal: if inflation is 4% and your raise is 3%, your buying power actually fell. A raise only feels like a gain when it beats the inflation rate.
Raises apply to gross pay
A raise is applied to your gross salary, before taxes. Because the extra income is also taxed, the bump to your take-home pay is smaller than the gross increase. Run your new salary through the Paycheck Calculator to see the after-tax difference.