Pay Rise Needed To Beat Inflation Calculator

Work out pay rise needed to beat inflation instantly with clear inputs, formula shown and shareable results.

About Pay Rise Needed To Beat Inflation Calculator

Matching inflation only holds purchasing power still. To gain in real terms the rise must compound the inflation rate with the target real gain, not simply add them. The after-tax value of the rise is what actually reaches your bank account, and at a high marginal rate that is a good deal less than the headline increase.

Formulas

Required rise

Required % = [(1 + Inflation) x (1 + Target real gain) - 1] x 100

After-tax value

After-tax rise = Gross rise x (1 - Marginal tax rate %)

Worked example

With the default values below, Pay Rise Needed To Beat Inflation Calculator returns Pay rise required of 8.63%. Change any input above and every figure here is recalculated in your browser.

Inputs used

Current salary: 1,200,000
Inflation rate: 6.5
Marginal tax rate: 30
Real gain you want: 2

Results

Pay rise required: 8.63%
Salary needed: $1,303,560.00
Gross increase needed: $103,560.00
After-tax value of the rise: $72,492.00

Step by step

1Values used
2Required rise
3After-tax value
4Pay rise required= 8.63
5Salary needed= 1,303,560.00
6Gross increase needed= 103,560.00
7After-tax value of the rise= 72,492.00

Assumptions and limits

The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
In particular, this calculator does not take fees or charges or compounding frequency into account.
Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

Why compound rather than add?

Because the real gain applies to money that has already been uprated for inflation. At 6.5% inflation and a 2% real target the compounded figure is 8.6%, not 8.5%.

Does tax change the percentage rise required?

Not with a flat marginal rate, since salary and prices are in the same units. It does change how much of the rise you keep, which is why the after-tax figure is shown.