Numbers feel different depending on how they are framed. A "$3,200 raise" sounds generous. "A 4.4% raise on a $72,000 salary" sounds precise. Whether that raise is actually good depends on one more number: what inflation did that year. This guide covers the formula for every income-change scenario and the context you need to evaluate what the number actually means.
The Core Formula
Percentage Change = ((New Value - Old Value) / Old Value) x 100
For a raise: Raise % = ((New Salary - Old Salary) / Old Salary) x 100
Example: salary goes from $72,000 to $75,200. Raise = ($75,200 - $72,000) / $72,000 x 100 = $3,200 / $72,000 x 100 = 4.44%
The old salary is always the denominator. This is the most common mistake people make -- dividing by the new salary instead of the old one gives you a different (and wrong) number.
Worked Examples
| Scenario | Old | New | % Change |
|---|---|---|---|
| Salary increase | $58,000 | $62,060 | +7.0% |
| Pay cut (reduced hours) | $85,000 | $76,500 | -10.0% |
| Bonus on top of salary | $50,000 | $57,500 | +15.0% |
| Hourly rate change | $22.00/hr | $24.20/hr | +10.0% |
| Freelance rate increase | $85/hr | $100/hr | +17.6% |
Is Your Raise Actually a Pay Raise?
A raise below the inflation rate is a real pay cut. Your nominal paycheck is higher, but your purchasing power -- what that money actually buys -- has declined.
Real raise = Raise % minus Inflation %
If you received a 3% raise and inflation was 4.1%, your real change in purchasing power is -1.1%. You are earning less in real terms than you were before the raise.
As a benchmark: US CPI inflation averaged about 2.5-3% annually in the years before the 2021-2023 spike, and has been trending back toward that range. A raise below 3% in a 3% inflation environment is a standstill, not an improvement.
Calculating What a Target Raise Percentage Means in Dollars
Formula: New Salary = Old Salary x (1 + Raise % / 100)
What does a 6% raise look like on different salaries?
| Current Salary | 6% Raise | New Salary |
|---|---|---|
| $45,000 | $2,700 | $47,700 |
| $65,000 | $3,900 | $68,900 |
| $90,000 | $5,400 | $95,400 |
| $120,000 | $7,200 | $127,200 |
Negotiating With Percentage Math
When negotiating a raise, expressing your ask as a percentage is more powerful than a dollar figure in some contexts and weaker in others. Use the dollar figure when you want the number to feel concrete and large. Use the percentage when you want to frame the ask as reasonable and data-grounded ("I am asking for 7%, which is in line with the industry average for this role at this experience level").
Two things to calculate before any negotiation: (1) what % raise you received last year, and (2) what % your total compensation has changed over the past three years. If you have received 2% raises for three years while inflation ran at 4%, you have lost about 6% of real purchasing power. That is a fact-based case for a correction, not just an increase.
For Freelancers: Calculating a Rate Increase
When raising your hourly or project rate, the same formula applies. A rate change from $85/hr to $100/hr is a 17.6% increase. Clients will often ask why -- having the percentage framing helps. "I am raising my rate by 18% to reflect two years of additional experience and a 9% cumulative increase in my operating costs" is a professional framing. "I want more money" is not.
The question of whether your effective margin improved with a rate increase depends on whether your costs grew at the same time. Our Margin Calculator lets you check margin before and after a rate change. Our Percentage Change Calculator handles any income-change calculation instantly.