Introduction

Calculating a salary increase percentage can be crucial for both employees and employers during the annual salary review process. It allows everyone involved to analyze and compare their new salary offer with their previous earnings and industry benchmarks. In this article, we will outline a step-by-step guide on how to calculate a salary increase percentage effectively.

Step 1: Determine the current and proposed salaries

The first step in calculating a salary increase percentage is to determine the current salary and the proposed new salary. This information is typically provided by employers during performance reviews or when discussing promotions.

Step 2: Calculate the difference between the current and proposed salaries

Once you have determined your current and proposed salaries, you need to calculate the difference between these two figures. This can be done using a simple subtraction formula:

Salary Increase = Proposed Salary – Current Salary

For example, if your current salary is $40,000 and you are offered a new salary of $45,000, the salary increase would be:

$45,000 – $40,000 = $5,000

Step 3: Calculate the salary increase percentage

After finding the difference between your current and proposed salaries, you need to calculate the percentage of that increase. To do this, divide the salary increase by your current salary and multiply by 100 to get the percentage:

Salary Increase Percentage = (Salary Increase / Current Salary) x 100

Using our previous example with a $5,000 salary increase:

($5,000 / $40,000) x 100 = 12.5%

This means that your salary has increased by 12.5%.

Step 4: Compare your salary increase percentage with industry benchmarks

Now that you have calculated your salary increase percentage, it’s essential to compare this figure with industry benchmarks or averages. This information may be available through company databases or industry-related publications. Comparing your increase to industry benchmarks will help determine whether your new salary is competitive.

In some cases, it is also useful to analyze the company’s overall salary structure and performance metrics. This information can provide context for why certain salary increases are awarded.

Conclusion

Calculating a salary increase percentage is a valuable skill that can help both employees and employers make informed decisions during salary reviews. By following these outlined steps, you will be well-equipped to understand your new salary offer in comparison with your current earnings, and confidently negotiate if necessary. Remember to always consider industry benchmarks and company-specific factors when analyzing your salary increase percentage for a well-rounded perspective.