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How to calculate salary hike percentage?
Salary hike percentage can be calculated with the following formula
Salary Hike Percentage = (New Salary − Current Salary) / Current Salary x 100
This gives the % of increase of your salary. If you have the % of increase and wish to calculate your new salary, this is the formula:
New Salary = Current Salary + {(Salary Hike Percentage / 100) x Current Salary}
Let us look at an example to understand.
An example of how to calculate the percentage of hike in salary
Let’s say that the current salary of Shubham is INR 30,000. The company is giving him a hike of 40% on his current salary. Then the future salary will be calculated as follows –
| Current Salary (in INR) | Hike Percentage | Formula | Future Salary/ Salary after Increment (in INR) |
| 30,000 | 40% | 30,000*40% = 12000 | (30000+12000) |
| Total Future Salary | 42000 |
Let us take forward the example given above. Let’s say the current salary of Raju is INR 30,000 and his future salary after increment is INR 42,000. Then the percentage of hike in salary will be calculated as follows –
| Current Salary (in INR) | Future Salary/ Salary after Increment (in INR) | Formula* | Percentage Hike |
| 30000 | 42000 | (42000-30000)/30000*100 | 0.4*100 |
| Percentage Hike in Salary | 40% |
Common Reasons for Salary Hike
There are many reasons why a company offers salary hike to an employee.
To inspire and motivate
A salary hike is a good way to motivate employees to continue to work and contribute positively to the company. Businesses that offer good salary hikes and financial incentives typically have lower attrition rates and are able to retain employees for longer.
To reward and recognise
Employees who have been consistently performing well and contributing to the growth and success of the company often receive salary hikes as a form of recognition. This reward acknowledges their hard work, dedication, and valuable contributions, encouraging them to maintain high levels of performance.
To support rising costs of living
Inflation causes the cost of living to consistently increase every year. Companies offer salary hikes to employees as a way of ensuring employees are able to maintain their purchasing power and way of life through rising prices.
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FAQs
1. How is the hike percentage calculated?
The salary hike percentage is calculated using the following formula –
(New salary – Old Salary) / Old Salary * 100 = Hike percentage.
- The first step is to find the difference between the new salary and the old salary
- Then the amount obtained is divided by the old salary.
- The figure thus obtained is multiplied by 100 to express it in percentage.
2. How is a 30 per cent hike in salary calculated?
A 30 % hike in salary is calculated as follows –
For better understanding, let’s assume the current salary to be INR 10,000
| Current Salary (in INR) | Hike Percentage | Formula | Future Salary/ Salary after Increment (in INR) |
| 10000 | 30% | 10000*30% = 3000 | (10000+3000) |
| Total Future Salary | 13000 |
