Salary increases can take many forms. You may get a promotion or promotion, or you may take on an entirely new job with a higher pay. Whatever the circumstances, you may want to know how to calculate your pay increase as a certain percentage of your previous salary. Since inflation figures and cost of living statistics are also often presented in percentage terms, calculating the increase as a percentage can help you compare that increase against other factors such as inflation. Learning how to calculate a percentage raise will also help you compare the compensation you receive with that of others in your field.
Step
Method 1 of 2: Calculating the Percentage of Salary Increase
Step 1. Subtract the new salary from the old salary
Say you earned $45 per year at your previous job, then you accepted a new position with a salary of $50,000 per year. This means you subtract $50,000,000 by $45,000,000 = $5,000.
If you receive an hourly pay and don't know your annual income, you can simply replace the salary figure with the old and new hourly pay. For example, if the increase is from Rp140,000/per hour to Rp160,000/per hour, then you can calculate: Rp160,000 – Rp140,000 = Rp20,000
Step 2. Divide the difference in salary by the old salary
To convert the increment amount to a percentage, you must first calculate it as a decimal. To get the decimal number, the difference obtained in Step 1 must be divided by the amount of the old salary.
- Based on the example in Step 1, this means $5,000 divided by $45,000,000. IDR 5,000,000 / IDR 45,000,000 = 0, 111.
- If you calculate the percentage increase in your hourly pay, the method remains the same. From the previous hourly pay example, then Rp20,000/Rp140,000 = 0.143
Step 3. Multiply that decimal number by 100
To convert a number written in decimal format to a percentage, you simply multiply it by 100. Using the previous example, you need to multiply 0.111 by 100. 0, 111 x 100 = 11.1% This means the new salary of IDR 50,000,000 is about 11.1% of Rp.45,000,000 i.e. previous salary or that you received an 11.1% increase.
For the hourly pay example, you still need to multiply the decimal number by 100. This will make the previous hourly pay example 0.143 x 100 = 14.3%
Step 4. Enter additional allowances if relevant
If you're comparing a new job at a new company and not just a raise or promotion at the current company, then salary may be just one part of the overall benefits package to consider. There are various other elements that need to be factored into the overall amount of the increase. Some of them are:
- Insurance benefits/premiums – If both jobs offer insurance coverage for the company's dependents, then you should compare the coverage of the two insurance plans. In making your decision, you also need to consider the premium (if relevant) that is deducted from your salary. For example, paying an insurance premium of IDR 200,000/month from the previous IDR 100,000 / month of course will cut some of your salary increase. Also consider what the coverage covers (does it include teeth and eyes?), at your own risk, etc.
- Bonuses or commissions – Even if they are not part of your standard salary, don't forget to include bonuses and/or commissions in each calculation. The new salary may offer a higher pay, but if your current job offers the possibility of a quarterly bonus, for example, would that increase still be better?
- Old Age Savings (THT) – Many employers apply old age savings (THT) to their employees. Employers usually work with insurance companies for this program, for example with PT Taspen for civil servants and BUMN and Avrist for private employees. Usually for ENT companies work with insurance companies. ENT premiums can be paid by the employee or employer, or jointly between the employee and the employer. In the program offered by Avrist, for example, savings benefits will be paid upon retirement or when an employee is dismissed or resigns, as well as if the employee dies. If the company you currently work for doesn't offer ENT, then working for a new company that provides ENT is basically a free addition to your retirement.
- Retirement – Jobs that offer a pension if you work for a number of years without interruption should also be considered. If your current position offers a good retirement after twenty-five years, and your new job doesn't offer any pension, then you should consider that too. A higher annual salary may mean more funds received right away, but it's also worth considering the lifetime acceptance potential of each offer.
Method 2 of 2: Knowing the Relationship between Inflation and Salary Increase
Step 1. Understand inflation
Inflation is an increase in the price of goods and services so that it impacts your cost of living. High inflation, for example, often means rising prices for food, utilities, and fuel. People tend to spend less when inflation is high because this is when prices spike.
Step 2. Find information about inflation
Inflation is determined by many factors. In the US, the Bureau of Labor Statistics, the Department of Labor releases a monthly report containing the inflation monitoring and count there for the last fifteen years. In Indonesia, inflation data can be accessed via the Bank Indonesia website.
Step 3. Subtract your percentage increase from the inflation rate
To determine the effect of inflation on salary increases, you simply subtract the percentage increase you calculated in Section 1. For example, the average inflation rate in 2014 was 1.6%. Using the 11.1% increase rate calculated in Section 1, you can determine the effect of inflation on salary increases as follows: 11.1% - 1.6% = 9.5%. This means that after you take into account the soaring prices of standard goods and services due to inflation, then the increase in your salary only adds 9.5% because the value of money is 1.6% less compared to the previous year.
In other words, in 2014 it took an average of 1.6% more money to buy the same item in 2013
Step 4. Relate the effect of inflation to purchasing power
Purchasing power refers to the comparative cost of goods and services over time. For example, let's say you have a salary of $50,000,000 per year as in Part 1. Now let's say inflation hovered at 0% evenly the year you got a raise, but increased to 1.6% the following year while your salary didn't increase anymore. This means you need an additional 1.6% to buy the same basic goods and services. 1.6% of IDR 50,000,000 is equal to 0.016 x 50,000,000 = IDR 800,000. Your overall purchasing power based on inflation actually decreased by Rp800,000 compared to the previous year.
The US Bureau of Labor Statistics has an easy-to-use calculator to compare purchasing power from year to year. You can find it at:
Tips
- There are several online calculators you can use to quickly determine your salary increase as a percentage
- The examples above can also be applied to other currencies.
