Inflation-Matching Raise Calculator
Calculate the raise preserving purchasing power.
Inflation-Matching Raise Calculator: Scenario Inputs
Annual percentage rate or benchmark index change.
Inflation & Purchasing Power Analysis
Over 3 years at 3.5% inflation, a $75,000 salary requires $83,154 to retain equal purchasing power. Without matching raises, your real compensation experiences an effective reduction of $7,355 (-9.81%).
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How Inflation-Matching Raise Calculator Works?
The Inflation-Matching Raise Calculator works by grossing up the net increase needed for inflation by the marginal tax rate.
Enter gross and net pay
Type current gross salary and current take-home pay.
Enter inflation
Type inflation for the period.
Enter the marginal rate
Type the combined marginal rate on extra income, including payroll taxes.
Read the matching raise
The output shows the net increase needed, the gross raise in dollars and the gross raise in percent.
Inflation-Matching Raise Calculator Formula
The Inflation-Matching Raise formula divides the net increase needed for inflation by one minus the marginal tax rate.
ΔNet = Net Pay × π
ΔGross = ΔNet ÷ (1 − m)
Variables
- Net Pay
- Current yearly take-home pay
- π
- Inflation rate
- m
- Marginal tax rate on extra income
Worked example
Take-home pay of $52,000 needs $2,080 more at 4% inflation. At a 32% marginal rate, the gross raise needed is $3,059. On a $68,000 gross salary that equals 4.50%, more than the 4% inflation rate.
Inflation-Matching Raise Calculator Conversion Table
This table shows the gross raise that keeps $52,000 of take-home pay level with 4% inflation at 5 marginal tax rates, for a $68,000 gross salary.
| Marginal tax rate | Net increase needed | Gross raise needed | Gross raise % |
|---|---|---|---|
| 12% | $2,080 | $2,364 | 3.48% |
| 22% | $2,080 | $2,667 | 3.92% |
| 24% | $2,080 | $2,737 | 4.02% |
| 32% | $2,080 | $3,059 | 4.50% |
| 40% | $2,080 | $3,467 | 5.10% |
What is Inflation-Matching Raise Calculator?
The Inflation-Matching Raise Calculator is a tool that calculates the gross raise needed to keep take-home pay level with inflation after tax on the raise. The raise is taxed at the marginal rate, so the gross raise needs to exceed the inflation rate to protect net pay.
The calculator asks for net pay and the marginal tax rate, then returns the gross dollar raise and the gross percentage raise.
What are the uses of Inflation-Matching Raise Calculator?
There are 4 main uses of the Inflation-Matching Raise Calculator.
Protect take-home pay
Ask for the gross raise that keeps net pay level with prices.
Account for bracket creep
Show the cost of higher marginal rates on raises.
Compare countries
Compare matching raises under different tax systems.
Design net-pay policies
HR teams set raises that protect net pay for staff in high brackets.
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