Salary Hike Calculator
Salary Hike Calculator
Your new salary after a percentage hike, the raise per month, and what the hike is really worth after inflation — with a projection if the same hike repeats every year.
New salary
$12,00,000 a year, a 10% hike, 4% inflation
New salary and the real hike
- S
- your current salary
- h
- the hike, as a decimal
- i
- inflation over the year, as a decimal
Worked example
$12,00,000 a year, a 10% hike, 4% inflation
New salary = 12,00,000 × 1.10 = $13,20,000
Increase = $1,20,000 a year, $10,000 a month
Real hike = 1.10 ÷ 1.04 − 1 = 5.77%
The same hike for 5 years: $19,32,612, worth $15,88,466 in today's money
Real hike by nominal hike and inflation
| Hike | Inflation 4% | Inflation 6% |
|---|---|---|
| 3% | -0.96% | -2.83% |
| 5% | 0.96% | -0.94% |
| 8% | 3.85% | 1.89% |
| 10% | 5.77% | 3.77% |
| 15% | 10.58% | 8.49% |
The hike on paper and the hike you can spend
A hike raises the number on your payslip; inflation raises the prices you pay with it. The real hike compares the two. Divide one plus the hike by one plus inflation and subtract one: a 10% hike in a year of 4% inflation is a real hike of 5.77%, not 6%, because the old salary would itself have needed 4% more just to stand still. A 4% hike in a 6% year is a real cut of 1.89%.
The chart runs the same hike forward for the years you choose. The top line is your salary as it will read on paper; the middle line is the salary that would merely keep pace with inflation; the bottom line is your salary in today’s money. While the hike beats inflation the top line pulls away from the middle one, and your buying power grows: in the worked example, $19,32,612 after five years is worth $15,88,466 at today’s prices. The default inflation is the central bank’s target for your currency; actual inflation often runs higher, and the prices you face may rise faster still, so try a higher figure. The inflation calculator shows the effect on any sum.
Compare like with like. A hike quoted on cost to company (CTC) includes employer contributions such as provident fund and gratuity, so your take-home pay may rise by a different percentage; variable pay and bonuses may not repeat. Tax is not included: a higher salary can be taxed at a higher marginal rate, so the rise in take-home pay can be smaller than the hike. This is arithmetic on the figures you enter, not financial advice.
Frequently asked questions
How do I calculate my new salary after a hike?
Multiply by one plus the hike. $12,00,000 with a 10% hike is $13,20,000, or $10,000 more a month.
What is a real salary hike?
The hike after inflation: (1 + hike) ÷ (1 + inflation) − 1. A 10% hike with 4% inflation is 5.77%.
Is a hike below inflation a pay cut?
In buying power, yes. A 4% hike in a year of 6% inflation leaves you 1.89% worse off in real terms.
Does a CTC hike raise my take-home pay by the same percentage?
Not necessarily. CTC includes employer contributions and sometimes variable pay, and tax takes a share of the rise. Check your new salary structure.
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References
- Central-bank inflation targets used as default inflation by currency: Reserve Bank of India (4% CPI, flexible inflation targeting framework); U.S. Federal Reserve (2% PCE); European Central Bank (2%); Bank of England (2% CPI); Bank of Canada (2%); Reserve Bank of Australia (2–3%); Bangko Sentral ng Pilipinas (3% ± 1). Actual inflation often runs above target.