Pay rise vs inflation
Earning more does not always mean you can buy more: if prices rise faster than your pay, you lose purchasing power. Compare your pay rise with inflation over the same period.
How to tell whether your pay rise beats inflation
Enter your previous salary, your new one and inflation over the same period. The calculator tells you how much your pay went up, how much your purchasing power really changed, the salary you would need to keep it and what your new salary is worth at old prices.
Example: if your salary goes from 30,000 to 31,000, it rises 3.3%. But if prices have risen 4%, you lose 0.6% of purchasing power: to keep it you would need 31,200, 200 more. At old prices, your new salary is worth 29,808.
How it is calculated
- Nominal increase = new salary ÷ previous salary − 1.
- Real increase = (1 + nominal increase) ÷ (1 + inflation) − 1.
- Salary to keep purchasing power = previous salary × (1 + inflation).
Assumptions
- Inflation must cover the same period as the pay rise: use your country's official figure.
- Compare gross with gross or net with net: if taxes change with the rise, net pay gives a truer picture.
Frequently asked questions
What is purchasing power?
What your money can buy. If your pay rises less than prices, you earn more but can buy less.
How is the real pay rise calculated?
Real rise = (1 + pay rise) ÷ (1 + inflation) − 1. Simply subtracting inflation from the rise is an approximation; this is the exact formula.
Which inflation rate should I use?
Your country's official figure between the same dates you are comparing: for example, the change in prices over the year between the two payslips.
Should I compare gross or net pay?
Either, but the same in both fields. If your taxes change with the rise, comparing net pay better reflects what reaches your account.
What if I want to compare several years?
Use cumulative inflation, not the sum: 3% and then 2% is 5.06% in total, because (1.03 × 1.02) − 1 = 0.0506.