What is a pay raise and how is it calculated?

A pay raise is an increase in the amount of money an employee receives for their work, usually expressed as a percentage of their current earnings. It varies based on performance, cost of living, or promotions. You calculate it by determining the difference between the new and old pay rates relative to the original amount.

Formula

Pay Raise % = ((New Pay − Old Pay) ÷ Old Pay) × 100

Worked Example

If your hourly wage goes from $20 to $22:

1. Find the difference: $22 − $20 = $2
2. Divide by old pay: $2 ÷ $20 = 0.10
3. Multiply by 100: 0.10 × 100 = 10%

Result: Your pay raise is 10%.