How do I calculate a percentage raise?

New salary = Old salary × (1 + raise%). A $60,000 salary with a 5% raise becomes 60,000 × 1.05 = $63,000. The raise amount itself is 60,000 × 0.05 = $3,000.

Why doesn't my take-home pay go up by the same percentage as my raise?

Because taxes, and often other deductions like retirement contributions or health premiums, are calculated on gross pay, and some are on progressive brackets. A raise can push part of your income into a higher marginal tax bracket, so net pay grows by a smaller percentage than gross pay, even though every dollar of the raise itself is real.

How do I calculate what percentage raise I got?

Percent raise = (New salary − Old salary) ÷ Old salary × 100. Going from $60,000 to $63,000 is (63,000 − 60,000) ÷ 60,000 × 100 = 5%. This is the same formula as percent change.

Do two raises in a row add up?

No — they compound, the same way as any two sequential percentages. A 3% raise followed by a 3% raise the next year is not a 6% total increase; it's 1.03 × 1.03 = 1.0609, a 6.09% increase, because the second raise is computed on the already-raised salary.

Guide

How to calculate a percentage raise on your salary

Your offer letter says a 5% raise. Your paycheck grows by less than 5%. Neither number is wrong — they're answering different questions.

By Buğra SözeriPublished September 25, 2026

“You're getting a 5% raise” is one of the most common percentage statements in daily life, and also one of the most commonly misread. The 5% applies to your gross salary — the number on your offer letter — not to the amount that lands in your bank account. This guide covers the raise formula itself, why gross and net don't move by the same percentage, and what happens when raises stack across multiple years.

The basic raise formula

A percentage raise is applied the same way any percentage increase is:

New salary = Old salary × (1 + r)

where r is the raise as a decimal. A $60,000 salary with a 5% raise: 60,000 × 1.05 = $63,000. The raise itself, in dollars, is 60,000 × 0.05 = $3,000. Going the other direction — figuring out what percentage a raise represents given the old and new numbers — uses the standard percent change formula: (63,000 − 60,000) ÷ 60,000 × 100 = 5%.

Old salary	Raise %	Raise amount	New salary
$50,000	3%	$1,500	$51,500
$60,000	5%	$3,000	$63,000
$80,000	7%	$5,600	$85,600
$100,000	4%	$4,000	$104,000

Why your paycheck doesn't grow by exactly 5%

The 5% is computed on gross pay — your salary before taxes and deductions. Your take-home pay is what's left after federal and state withholding, Social Security and Medicare (FICA), and any pre-tax deductions like a 401(k) contribution or health insurance premium. Two things make the net-pay percentage differ from the gross-pay percentage:

Progressive tax brackets. In the U.S. federal system, only the income inside each bracket is taxed at that bracket's rate. If a raise pushes part of your income into a higher bracket, that slice of the raise is taxed more heavily than the rest of your salary was — so a larger fraction of the raise itself goes to tax than the fraction your existing salary paid.
Percentage-based deductions. If your 401(k) contribution or a similar deduction is set as a percentage of pay rather than a flat dollar amount, it scales up automatically with the raise, taking a bite out of the net increase before it ever reaches your take-home pay.

None of this means the raise is smaller than advertised — the full 5% is real, and it's the number your employer actually budgeted and calculated. It just isn't the number that shows up as a percentage change on your net paycheck, because gross and net pay pass through different math on the way there.

Stacked raises compound, they don't add

A 3% raise this year and a 3% raise next year is not a flat 6% increase over two years. Each raise multiplies the current salary, so the two compound:

1.03 × 1.03 = 1.0609

That's a 6.09% total increase, not 6% — a small gap at these numbers, but the same compounding mechanism that makes compound interest grow faster than simple interest over many periods. Over a five-year run of 3% annual raises, the compounded total is 1.03⁵ − 1 ≈ 15.9%, noticeably more than the naive 15% you'd get by just adding five 3%s together.

Checking a raise on your own numbers

To sanity-check any raise: take your old gross salary, multiply by (1 + the quoted percentage), and confirm it matches the new figure on your offer letter or pay statement. If you want to work out the percentage from two known salary figures instead — for a performance review, a job-offer comparison, or checking a past raise — the same percent-change formula applies in reverse.

Frequently asked questions

How do I calculate a percentage raise?: New salary = Old salary × (1 + raise%). A $60,000 salary with a 5% raise becomes 60,000 × 1.05 = $63,000. The raise amount itself is 60,000 × 0.05 = $3,000.
Why doesn't my take-home pay go up by the same percentage as my raise?: Because taxes, and often other deductions like retirement contributions or health premiums, are calculated on gross pay, and some are on progressive brackets. A raise can push part of your income into a higher marginal tax bracket, so net pay grows by a smaller percentage than gross pay, even though every dollar of the raise itself is real.
How do I calculate what percentage raise I got?: Percent raise = (New salary − Old salary) ÷ Old salary × 100. Going from $60,000 to $63,000 is (63,000 − 60,000) ÷ 60,000 × 100 = 5%. This is the same formula as percent change.
Do two raises in a row add up?: No — they compound, the same way as any two sequential percentages. A 3% raise followed by a 3% raise the next year is not a 6% total increase; it's 1.03 × 1.03 = 1.0609, a 6.09% increase, because the second raise is computed on the already-raised salary.

Sources & references

Authoritative references cited by this piece. Verified by Buğra Sözeri on the dates shown and re-checked at every deploy.

IRS — Tax Withholding Estimator and Publication 15-T — IRS reference on how withholding is computed against gross pay, explaining why net pay doesn't scale 1:1 with a raise(as of 2026-09-25)
U.S. Bureau of Labor Statistics — Employer Costs for Employee Compensation — BLS data on how raises and total compensation are tracked and reported(as of 2026-09-25)