Getting a pay rise is good news, but the number itself does not always tell the full story.
A £1,000 salary increase may sound useful, but what does that mean as a percentage? How much extra does it give you each month? And how does it compare with inflation, taxes, bills and your overall cost of living?
This guide explains how to calculate a percentage pay rise, work out your new annual salary, and understand what the increase really means.
What Is a Pay Rise Percentage?
A percentage pay rise shows how much your salary has increased compared with your previous salary.
Instead of only looking at the cash amount, the percentage tells you the size of the increase in relation to what you were already earning.
For example:
- A £1,000 pay rise on a £20,000 salary is a 5% increase.
- A £1,000 pay rise on a £50,000 salary is a 2% increase.
The cash amount is the same, but the percentage is different because the starting salary is different.
This is why pay rise percentages are useful when comparing salary increases, job offers, promotions or annual wage reviews.
Pay Rise Percentage Formula
To calculate a pay rise percentage, use this formula:
Pay rise percentage = Pay rise amount ÷ Old salary × 100
Or:
New salary – Old salary ÷ Old salary × 100
The easiest way to think about it is:
- Work out how much your salary has increased.
- Divide that increase by your old salary.
- Multiply the result by 100.
Example: How to Calculate a Pay Rise Percentage
Let’s say your salary increases from £28,000 to £30,000.
First, calculate the increase:
£30,000 – £28,000 = £2,000
Then divide the increase by your old salary:
£2,000 ÷ £28,000 = 0.0714
Then multiply by 100:
0.0714 × 100 = 7.14%
So, a salary increase from £28,000 to £30,000 is a 7.14% pay rise.
Quick Pay Rise Percentage Examples
| Old Salary | New Salary | Increase | Pay Rise Percentage |
| £20,000 | £21,000 | £1,000 | 5% |
| £25,000 | £27,500 | £2,500 | 10% |
| £30,000 | £31,500 | £1,500 | 5% |
| £40,000 | £42,000 | £2,000 | 5% |
| £50,000 | £55,000 | £5,000 | 10% |
These examples show why the percentage matters. The same increase can feel very different depending on your original salary.
How to Work Out Your New Annual Salary After a Pay Rise
If you know your current salary and the percentage increase, you can calculate your new salary using this formula:
New salary = Old salary × (1 + pay rise percentage ÷ 100)
For example, if your current salary is £32,000 and you receive a 6% pay rise:
£32,000 × 1.06 = £33,920
Your new annual salary would be £33,920.
Example: 5% Pay Rise on £30,000
A common question is: what is a 5% pay rise on £30,000?
Use the formula:
£30,000 × 5% = £1,500
So, a 5% pay rise on £30,000 is worth £1,500 per year.
Your new salary would be:
£30,000 + £1,500 = £31,500
That means your annual salary increases from £30,000 to £31,500.
How Much Is a Pay Rise Per Month?
To estimate the monthly value of a pay rise, divide the annual increase by 12.
For example, if your salary increases by £1,500 per year:
£1,500 ÷ 12 = £125 per month
So, before tax and deductions, a £1,500 annual pay rise is worth £125 per month.
However, this is your gross increase. Your actual take-home pay may be lower once income tax, National Insurance, pension contributions, student loan repayments or other deductions are applied.
Gross Pay Rise vs Take-Home Pay Rise
Your gross pay rise is the increase before deductions.
Your take-home pay rise is the amount you actually receive in your bank account after deductions.
For example, a £2,000 annual pay rise does not usually mean you will take home an extra £2,000 per year. Depending on your earnings and deductions, part of that increase may go towards:
- Income tax
- National Insurance
- Pension contributions
- Student loan repayments
- Workplace benefits
- Salary sacrifice arrangements
This is why it is useful to understand both your salary increase and your likely take-home pay increase.
A pay rise calculator can help you estimate the difference more quickly than doing every step manually.
How to Calculate a Pay Rise from Hourly Pay
If you are paid hourly, you can calculate your pay rise percentage in the same way.
Use this formula:
Hourly pay rise percentage = Hourly pay increase ÷ Old hourly rate × 100
For example, if your hourly rate increases from £12.00 to £13.20:
£13.20 – £12.00 = £1.20
Then:
£1.20 ÷ £12.00 × 100 = 10%
So, an increase from £12.00 to £13.20 per hour is a 10% pay rise.
To estimate the annual impact, multiply the hourly increase by the number of hours you work per week, then by the number of weeks you work per year.
For example:
£1.20 × 37.5 hours × 52 weeks = £2,340 per year
So, if you work 37.5 hours per week, that hourly increase could be worth around £2,340 extra per year before tax.
How to Compare a Pay Rise with Inflation
A pay rise can look good on paper, but it is worth comparing it with inflation.
Inflation measures how much prices are rising over time. If your pay rise is lower than inflation, your salary may increase, but your spending power could still fall.
For example:
- If your pay rises by 3%
- But prices rise by 5%
- Your income has increased, but your money may not stretch as far
This is sometimes called a real-terms pay cut.
If your pay rise is higher than inflation, your spending power may improve. If it is lower than inflation, you may need to budget carefully even though your salary has gone up.
What Is a Good Pay Rise Percentage?
There is no single answer because a good pay rise depends on your role, industry, performance, location and current salary.
However, pay rises are often influenced by:
- Company performance
- Inflation and cost of living
- Market rates for your role
- Promotions or added responsibilities
- Skills, qualifications or experience
- Recruitment and retention pressures
A small annual increase may help with cost-of-living changes, while a larger increase may reflect a promotion, a job move, or a significant change in responsibilities.
If you are negotiating a pay rise, it helps to focus on evidence. This could include your achievements, measurable results, additional responsibilities, market-based salary data, and the value you bring to the business.
Pay Rise Percentage vs Salary Increase: Which Matters More?
Both matter, but they tell you different things.
The salary increase tells you the cash amount.
The pay rise percentage indicates how significant the increase is relative to your current salary.
For example, a £2,000 pay rise may feel different depending on whether your current salary is £22,000, £35,000 or £60,000.
That is why it is helpful to look at:
- The annual increase
- The percentage increase
- The monthly gross increase
- The likely take-home increase
- Whether the rise keeps up with inflation
- How it compares with similar roles
Looking at all of these gives you a clearer picture of what your pay rise really means.
Common Pay Rise Calculations
How do you calculate a 3% pay rise?
Multiply your current salary by 0.03.
For example:
£30,000 × 0.03 = £900
A 3% pay rise on £30,000 is £900 per year, making the new salary £30,900.
How do you calculate a 5% pay rise?
Multiply your current salary by 0.05.
For example:
£30,000 × 0.05 = £1,500
A 5% pay rise on £30,000 is £1,500 per year, making the new salary £31,500.
How do you calculate a 10% pay rise?
Multiply your current salary by 0.10.
For example:
£30,000 × 0.10 = £3,000
A 10% pay rise on £30,000 is £3,000 per year, making the new salary £33,000.
Why Your Pay Rise May Feel Smaller Than Expected
A pay rise can feel smaller than expected once it reaches your payslip.
This is usually because your increase is calculated before deductions. Your take-home pay may also be affected by pension contributions, student loans, tax codes or salary sacrifice schemes.
For example, if your gross monthly pay increases by £150, you may not see the full £150 added to your net pay.
This does not mean the pay rise is wrong. It simply means that your gross salary and take-home pay differ.
That is why it is useful to calculate your gross pay rise first, then estimate how it may affect your monthly take-home pay.
Simple Steps to Calculate Your Pay Rise
To calculate your pay rise percentage:
- Find your old salary.
- Find your new salary.
- Subtract the old salary from the new salary.
- Divide the increase by the old salary.
- Multiply by 100.
Example:
Old salary: £26,000
New salary: £28,000
Increase: £2,000
£2,000 ÷ £26,000 × 100 = 7.69%
So, the pay rise is 7.69%.
Final Thoughts
Calculating a pay rise percentage is simple once you know the formula.
The key is to compare the increase with your old salary, not just look at the cash amount. This helps you understand whether the rise is small, moderate or significant.
It is also worth looking beyond the headline figure. Your annual salary may increase, but your monthly take-home pay will depend on tax, National Insurance, pension contributions and other deductions.
By working out the percentage, annual increase and monthly impact, you can get a much clearer picture of what your pay rise really means.
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FAQ on Calculate Pay Rise Percentage
How do I calculate my pay rise percentage?
Subtract your old salary from your new salary, divide the increase by your old salary, then multiply by 100.
For example, if your salary increases from £30,000 to £31,500:
£1,500 ÷ £30,000 × 100 = 5%
So, your pay rise is 5%.
What is a 5% pay rise on £30,000?
A 5% pay rise on £30,000 is £1,500 per year.
Your new annual salary would be:
£30,000 + £1,500 = £31,500
Before tax and deductions, this is equal to £125 extra per month.
How much is a 10% pay rise?
A 10% pay rise means your salary increases by one tenth.
For example, a 10% pay rise on £25,000 is:
£25,000 × 0.10 = £2,500
Your new salary would be £27,500.
Is a pay rise calculated before or after tax?
A pay rise is usually calculated before tax. This means the increase is based on your gross salary, not your take-home pay.
Your actual monthly increase may be lower after income tax, National Insurance, pension contributions and any other deductions.
What is the formula for a pay rise percentage?
The formula is:
Pay rise percentage = Pay rise amount ÷ Old salary × 100
You can also use:
New salary – Old salary ÷ Old salary × 100
This shows the increase as a percentage of your original salary.
Why is my take-home pay rise lower than my salary increase?
Your salary increase is usually your gross increase before deductions. Your take-home pay may be lower due to income tax, National Insurance, pension contributions, student loan repayments, or other deductions from your payslip.