Salary raise calculator
A raise sounds great until inflation eats into it. This calculator converts a raise percentage — or a new salary figure — into the annual and monthly increase, then shows the real raise once inflation is accounted for. It is for anyone weighing a pay-rise offer, an annual review or a cost-of-living adjustment and wondering whether their purchasing power actually grew.
How it works
Your new salary is the current figure multiplied by 1 + raise% / 100 (or you
enter the new salary directly). The annual increase is new − current, the
monthly increase is that divided by 12, and the headline percentage is
increase ÷ current × 100.
The real raise is not simply the raise minus inflation. It divides the growth factors (the Fisher relationship):
real% = ( (1 + raise%/100) ÷ (1 + inflation%/100) − 1 ) × 100
That is why a 5% raise against 3% inflation works out to roughly 1.94% in real terms, not 2%.
Example
Current salary £35,000, a 5% raise, inflation 3%:
| Figure | Value |
|---|---|
| New salary | £36,750 |
| Annual increase | £1,750 |
| Monthly increase | ~£146 |
| Headline raise | 5% |
| Real raise (after inflation) | ~1.94% |
Your purchasing power grows by about £680 a year in real terms, not the full £1,750 nominal figure.
What a “real raise” actually means
When your salary goes up by the same percentage as inflation, your nominal pay is higher but your purchasing power is unchanged — you can buy exactly the same goods and services as before. This is why a raise that simply matches inflation is commonly described as a pay freeze in real terms.
A real raise of 0% means your standard of living is static. A positive real raise — say 2% — means you can afford roughly 2% more goods and services this year than last year. A negative real raise means your purchasing power has fallen: your pay cheque shows a larger number but buys less.
This matters most in periods of elevated inflation. During normal low-inflation years (1–2%), a 3% raise gives a comfortable positive real raise of about 1%. During high-inflation years (6–8%), a 3% raise is actually a meaningful cut in living standards.
Common scenarios
| Raise % | Inflation % | Headline raise | Real raise | Outcome |
|---|---|---|---|---|
| 3% | 1.5% | 3% | ~1.48% | Modest real gain |
| 4% | 4% | 4% | ~0% | Breaking even |
| 2% | 6% | 2% | ~-3.77% | Real pay cut |
| 8% | 3% | 8% | ~4.85% | Strong real gain |
| 0% | 5% | 0% | ~-4.76% | Frozen salary, real cut |
Practical tips
- Negotiate in real terms. If inflation is 5%, a 5% raise is a cost-of-living adjustment, not a reward for performance. Ask for CPI-plus your market rate.
- Check against your market. A real raise that keeps you below market rate is still a financial loss relative to switching jobs. Use salary surveys for your role and region alongside this calculator.
- Monthly figure is actionable. The monthly increase (annual rise ÷ 12) tells you how much extra you actually see each pay period — the number that affects your monthly budget.
All figures are gross — before income tax and other deductions. Everything is calculated locally in your browser; your salary is never uploaded or stored.