Salary increments and raises are significant aspects of an employee’s career progression. They serve as an acknowledgment of hard work, dedication, and productivity. As performance evaluations and pay increases are becoming increasingly commonplace, understanding how to calculate raise percentages is crucial for both employees and employers. In this article, we will guide you step by step through the process of calculating raise percentage.

Step 1: Identify the Current Salary and New Salary

Before you begin, gather necessary information about the current salary and new salary after the raise. The values might be provided through a performance review or raise negotiation with your employer. As an employer, you might reach the new salary figure by evaluating market rates, competition, or employee expectations.

Step 2: Calculate the Difference in Salary

To calculate the raise percentage, first determine the difference between the current salary and the proposed new salary.

Difference in Salary = New Salary – Current Salary.

For example, suppose your current salary is $50,000 per year, and you receive a promotion with a new salary of $55,000 per year.

Difference in Salary = $55,000 – $50,000 = $5,000.

Step 3: Calculate Raise Percentage

Now that we have discovered the difference in salary, we can calculate the raise percentage. To do so, simply divide the difference in salary by the current salary:

Raise Percentage = (Difference in Salary / Current Salary) x 100%

Using our earlier example:

Raise Percentage = ($5,000 / $50,000) x 100% = 10%

So for a rise from a $50,000 to a $55,000 per year salary means you have received a 10% increase.

Final Thoughts

Understanding how to calculate your raise percentage allows you to evaluate your financial progress effectively while planning for future expenses and savings goals. Additionally, this knowledge enables employers to offer market-competitive salary increments and motivate their employees. Keep this handy technique in your repertoire to make informed decisions about your personal and professional financial growth.