If your boss promised you a raise and you're speculating when you will be able to afford that beautiful Ferrari you're craving, this tool might be of help. Or maybe you're planning your budget and are wondering how much more you should earn and save to take a relaxing cash-bath once in a while? Continue reading to learn how to calculate a pay raise, when you can expect one, how much more you will have in your paycheck and... will it even matter?
How to calculate a salary increase using the calculator
Enter the number of hours you work per week. It is set to 40 by default.
Enter the pay before the raise into the calculator. You can choose whichever form is most convenient for you, be it the hourly, weekly, monthly, or annual rate, and the rest will be converted automatically.
Enter the raise percentage, raise amount, or new pay. Once you fill in one of those fields, the pay raise calculator will output all remaining variables.
An example of how to calculate a salary increase
Let's say you're thinking about switching jobs so you can save funds for your own business. Your current boss values your skills and offers you a pay raise of 10 % to convince you to stay in his company. The proposal sounds tempting, but you would like to know how much money that is and how it compares to the salary you would earn at the other job. You work 50 hours per week (some say a little bit too much) and currently earn $35,000 monthly. You enter the values into the pay raise calculator and see that after the raise, you would earn an additional $3,500, and your new monthly salary would be $38,500. At the interview for the other job, you were offered a salary of $50,000. After considering other factors like development perspectives, you decide to take the new job.
How to calculate a pay raise on your own
The formula the pay raise calculator uses is:
new salary = old salary + old salary * raise %
If you know the raise percentage and want to determine the new salary amount:
- Convert the percentage into decimal form.
- Multiply the old salary by this value.
- Add this new value to the old salary.
Using the example in the previous paragraph:
new salary = $35,000 + $35,000 * 0.1
new salary = $38,500
What about how to calculate the salary increase percentage if you know your new wage? Rearrange the equation from the beginning of this section and you will get this one:
raise = (new salary - old salary) / old salary * 100%
Let's say you used to earn $25 per hour, and now you're making $30. How to calculate the pay raise percentage you received?
raise = ($30 - $25) / $25 * 100%
raise = 20%
Your boss gave you a 20% pay raise.
When can you expect a pay raise
Depending on the company's strategy, a pay rise may be given based on:
- length of service - some companies give raises to all employees annually or bi-annually
- employee's performance - usually assessed annually
- merit - contributions, gaining new skills and responsibilities, or being promoted
- inflation - if the cost of living rises, the paycheck should be adequately bigger
- law - e.g., change in the national minimum wage
Got a bigger paycheck. But can money buy happiness?
Well, yes, to some extent. According to the analysis of the survey of 450,000 US residents, high income improves evaluation of life but not emotional well-being. The more people earn, the more positively they think about their life, but emotional well-being (the quality of everyday experiences, how often you feel sad versus joyful, etc.) correlates with salary only up to a salary of $75,000 annually. Once you earn this amount, additional money doesn't have a significant influence on your happiness, at least statistically speaking.
However, if you're among the lucky ones who earn more, let me tell you something before you burn your money. Research also says that if you want to feel happier, you can spend money on others rather than on yourself and invest in experiences instead of on material things.
So next time you're staring at the IKEA catalog, wondering what kind of a dining set defines you as a person and thinking whether you should buy this little coffee table in a shape of yin yang, wait a moment. Take a deep breath and consider other options, like retiring early, satisfying the needs of your significant others, or investing in experiences. Maybe it's time to set off on that journey around the world you've always dreamed of?
If you're unsure what your net pay is, you can use the gross to net calculator.