Key takeaways
- Raise percentage = (new pay − old pay) ÷ old pay × 100. Always divide by the old pay, not the new one.
- For a full-time hourly worker, each $1 an hour of raise is about $2,080 a year, using 40 hours × 52 weeks.
- A single filer in a state with no income tax keeps about 80% of a raise on a $60,000 salary, because the extra pay is taxed at the marginal rate plus 7.65% FICA.
- Your real raise is your raise minus inflation. With prices up 3.7% in the 12 months to September 2026, a 3% raise is a small pay cut in buying power.
- A raise costs the employer more than the raise itself: at least another 7.65% in Social Security and Medicare, plus any percentage-based benefits.
The raise percentage formula
To find the percentage of a raise you already have, take the increase in pay, divide it by your old pay and multiply by 100. Use the same unit on both sides: annual salary with annual salary, hourly rate with hourly rate.
Say your salary goes from $52,000 to $55,120. The increase is $3,120. Divide $3,120 by $52,000 and you get 0.06, a 6% raise. If you divided by the new pay instead, you would get about 5.7%, which understates it. The old pay is always the base.
The same works for an hourly wage. A move from $22.00 to $23.50 an hour is a $1.50 increase. $1.50 ÷ $22.00 = 0.068, a raise of about 6.8%.
Raise % = (New pay − Old pay) ÷ Old pay × 100
How to work out new pay from a raise percentage
If you have been offered a percentage, multiply your current pay by 1 plus the percentage as a decimal. A 4% raise on $60,000 is $60,000 × 1.04 = $62,400. The raise itself is $60,000 × 0.04 = $2,400.
If you are comparing several offers, or asking for a target salary, run it backwards: the raise you need to go from $62,000 to $65,000 is $3,000 ÷ $62,000, about 4.8%. A 5% raise would take you to $65,100.
Raises compound. Two 4% raises in a row are not 8%: $60,000 × 1.04 × 1.04 = $64,896, an increase of 8.16% over two years.
New pay = Old pay × (1 + Raise % ÷ 100) Raise amount = Old pay × Raise % ÷ 100
Hourly vs salary raises
To compare an hourly raise with a salaried one, convert it to a yearly figure. The usual convention, and the default in our hourly to salary calculator, is 40 hours a week for 52 paid weeks, which is 2,080 hours a year. On that basis, every $1 an hour of raise adds $2,080 a year before tax.
A percentage raise is the same percentage whichever way you are paid. A 4% raise on $25 an hour takes you to $26, which is $2,080 a year more. A 4% raise on a $52,000 salary is also $2,080, because $25 × 2,080 = $52,000.
If you work fewer hours, or some weeks are unpaid, the yearly value of an hourly raise is lower. Someone on 30 hours a week gets $1,560 a year from a $1 raise (30 × 52). Overtime works the other way: a raise lifts your overtime rate too, since overtime is paid at 1.5 times the regular rate.
| Raise | New hourly rate | New salary | Extra a year, before tax |
|---|---|---|---|
| 2% | $25.50 | $53,040 | $1,040 |
| 3% | $25.75 | $53,560 | $1,560 |
| 4% | $26.00 | $54,080 | $2,080 |
| 5% | $26.25 | $54,600 | $2,600 |
| 8% | $27.00 | $56,160 | $4,160 |
What a raise does to your take-home pay
A raise is taxed at your marginal rates: the federal income tax bracket your top dollars fall into, Social Security at 6.2%, Medicare at 1.45%, and any state or local income tax. So the share you keep is 100% minus those rates added together, not minus your average tax rate.
For a single filer on $60,000 in a state without income tax, the top dollars sit in the 12% federal bracket. Add 7.65% for Social Security and Medicare and about 19.65% of a raise goes to tax, leaving roughly 80%. In a state with income tax, or with 401(k) contributions set as a percentage of pay, the extra on each paycheck is smaller.
A raise never lowers your take-home pay through income tax brackets. Only the dollars above each bracket edge are taxed at the higher rate, so moving into a new bracket costs you a little more tax on the new dollars and nothing on the old ones.
Free toolPaycheck calculatorWorked example: a 4% raise on $60,000
An office manager in Texas earns $60,000 a year, paid every two weeks, files single with no dependents and has no pre-tax deductions. She gets a 4% raise. These figures come from our paycheck calculator, which uses the 2026 IRS withholding method. Inflation is the 3.7% rise in the Consumer Price Index for the 12 months to September 2026.
- She keeps $1,928.40 of the $2,400 raise, about 80%. The other $471.60 is 12% federal income tax plus 7.65% FICA.
- To keep pace with 3.7% inflation her salary would need to reach $62,220. At $62,400 her real raise is about 0.3%.
- Her employer pays $2,583.60 more a year: the raise plus its own 7.65% FICA on it.
| Figure | Before | After | Change |
|---|---|---|---|
| Salary | $60,000.00 | $62,400.00 | +$2,400.00 (4%) |
| Gross pay per paycheck (26 a year) | $2,307.69 | $2,400.00 | +$92.31 |
| Federal income tax withheld, per year | $5,020.00 | $5,308.00 | +$288.00 |
| Social Security and Medicare, per year | $4,590.00 | $4,773.60 | +$183.60 |
| Take-home pay per paycheck | $1,938.08 | $2,012.25 | +$74.17 |
| Take-home pay per year | $50,390.00 | $52,318.40 | +$1,928.40 |
| Employer’s extra Social Security and Medicare | +$183.60 |
Raise vs inflation: your real raise
A raise only makes you better off if pay rises faster than prices. The usual measure of prices in the US is the Consumer Price Index for All Urban Consumers (CPI-U), published monthly by the Bureau of Labor Statistics. In its October 14, 2026 release, the BLS reported that prices rose 3.7% over the 12 months to September 2026.
To find your real raise, divide 1 plus your raise by 1 plus inflation and subtract 1. For a quick estimate, subtracting inflation from the raise gets you close. A 4% raise against 3.7% inflation is a real raise of about 0.3%. A 3% raise is a real cut of about 0.7%: you earn more dollars, but they buy less.
Compare like with like. If your last raise was a year ago, use the 12-month CPI change. If it was longer ago, compare the total raise with the total price rise over the same period, and check the latest release, because the figure changes every month.
Real raise % = ((1 + Raise ÷ 100) ÷ (1 + Inflation ÷ 100) − 1) × 100 Quick estimate: Real raise ≈ Raise % − Inflation %
The employer’s side: what a raise really costs
If you run a business, budget for more than the raise. In the US the employer pays its own 6.2% Social Security and 1.45% Medicare on wages, 7.65% in all, so a $2,400 raise costs $2,583.60. Social Security stops at the 2026 wage base of $184,500 per employee; Medicare has no cap.
Benefits set as a percentage of pay grow too. A 4% 401(k) match on a $2,400 raise adds $96 a year. Overtime, paid holidays and bonuses worked out from the base rate all rise with it. Federal unemployment tax and most state unemployment taxes only apply up to a yearly wage limit, so a raise often adds nothing there for employees already above it.
Our employee cost calculator adds salary, employer taxes, benefits and equipment to show the full yearly cost and the loaded hourly cost, so you can test a raise before you offer it.
Employer cost of a raise = Raise × (1 + 7.65%) + Percentage-based benefits on the raise
Free toolEmployee cost calculator
