A pay rise sounds simple — your salary goes up. But calculating the actual percentage increase, checking whether an offer keeps pace with inflation or comparing two competing salary offers takes a bit more than a gut feeling. This article walks through every pay rise calculation you're likely to need.
How to Calculate the Percentage of a Pay Rise
If your salary is increasing from one amount to another and you want to know the percentage increase, use the standard percentage change formula:
Current salary: £42,000
New salary: £46,200
Increase: 46,200 − 42,000 = £4,200
Percentage increase: (4,200 ÷ 42,000) × 100 = 10%
Crucially, always divide by your original salary, not the new one. This is the most common mistake when calculating pay rise percentages, and it understates the increase if you use the new (higher) salary as the denominator.
How to Calculate Your New Salary from a Percentage Rise
If you've been offered a percentage rise and want to know your new salary:
Current salary: £55,000
Pay rise: 8%
New salary: 55,000 × 1.08 = £59,400
Annual increase: £4,400
Pay Rise vs Inflation: Real-Terms Value
A 5% pay rise sounds good. But if inflation is running at 6%, your pay rise is actually a real-terms pay cut. You have more pounds in your pocket, but they buy less than before.
To calculate the real-terms change in your salary, subtract the inflation rate from your pay rise percentage. A 5% pay rise with 6% inflation gives an approximate real-terms change of −1%. Your purchasing power has decreased by roughly 1%.
For a more precise calculation, use this formula:
Pay rise: 5% | Inflation: 6%
Real-terms change: ((1.05 ÷ 1.06) − 1) × 100 = −0.94%
Your salary has fallen in real terms by just under 1%.
Comparing Two Job Offers with Different Salaries
If you have two offers at different salary levels and want to compare them as a percentage uplift on your current pay, calculate the percentage change for each one separately. Then you can see which represents a larger relative increase, even if one has a higher absolute number.
Current salary: £48,000
Offer A: £54,000 → (6,000 ÷ 48,000) × 100 = 12.5% increase
Offer B: £53,500 → (5,500 ÷ 48,000) × 100 = 11.46% increase
In this case Offer A is larger both in absolute terms (£500 more) and percentage terms. But the comparison gets more interesting when you factor in benefits, pension contributions and other non-salary elements.
Negotiating: What a Percentage Means in Practice
When negotiating a pay rise, framing matters. A 7% rise on a £40,000 salary is £2,800 per year — about £233 per month gross. On a £60,000 salary, 7% is £4,200 per year — about £350 per month. The same percentage has a very different monetary impact depending on the base salary.
If you're presented with an absolute figure ("we can offer you £3,000 extra"), it's worth converting to a percentage to understand the relative size of the offer. An extra £3,000 on a £30,000 salary is 10% — generous. On a £90,000 salary, it's just 3.3% — quite different.
Annual Compounding: Pay Rises That Build on Each Other
One subtle but important point: consistent annual pay rises compound over time. Three years of 5% rises don't add up to 15%. They compound: year 1 × 1.05 × 1.05 × 1.05 = 1.1576, which is a total increase of 15.76%, not 15%. The difference is small at first but grows meaningfully over longer time horizons.
Calculate your exact pay rise percentage using the free Percentage Change Calculator.
Calculate My Pay Rise →Quick Reference
- Calculate pay rise %: ((New − Old) ÷ Old) × 100
- Calculate new salary: Old × (1 + Rise/100)
- Real-terms value: ((1 + rise/100) ÷ (1 + inflation/100) − 1) × 100
Salary figures used in examples are illustrative only. Calculations do not account for tax, NI or pension contributions. Take professional advice for decisions with material financial consequences.