How To Calculate Hike Percentage (Formula, Reasons And Tips)

Indeed Editorial Team

Updated 9 July 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

At regular intervals, most employers add an amount to your base salary, which is referred to as a salary hike. If you believe you are due for a salary increment, you may discuss it with your employer. The best way to get a suitable salary hike is to understand how to calculate it and manage the discussion with your employer politely and effectively, so learning more about it can help you approach your employer and negotiate better terms.

In this article, we discuss the meaning of a salary hike, outline how to calculate hike percentage and its formula, explore a few common reasons for a salary hike, important considerations and some tips for requesting a salary hike.

What is a salary hike?

A salary hike is an addition to an employee's compensation besides the bonus. Employers use salary hikes to adjust base salaries and compensation regularly. This type of salary increase is distinct from bonuses and commissions, which are typically performance-based. A salary hike typically recognises an employee's long service to a company and reflects changes in the employee's responsibilities towards them.

Related: How To Write An Increment Salary Letter (With Template)

How to calculate hike percentage

If you are wondering about how to calculate hike percentage for your salary, here are the steps:

1. Find the increase in the salary: It is important to know both the old salary and new salary to find the increase. Keep both salary amounts in either monthly or yearly amounts for correct calculation.

2. Calculate the salary increase: Find the amount by which the salary has increased by subtracting the new salary from the old salary.

3. Find hike percentage: To get the hike percentage, multiply the salary increase by 100 and then divide it with the old salary.

Formula to calculate hike percentage

It is very easy to calculate the hike percentage if you know your new and old salary. Here is the formula you can use to calculate the hike percentage:

(New salary - Old salary) * 100 / (Old salary) = Salary hike percentage

Suppose your monthly salary was ₹30,000 and your new salary is ₹36,000. The salary increase would be ₹35,000 - ₹30,000 = ₹6,000. Here, the hike percentage would become (₹6,000100) / ₹30,000 = 20%.

Related: What Is Mean Salary: Definition, Formula And Importance

Common reasons for salary hike

Employees receive salary hikes for a variety of reasons, depending on the company for which they work and the industry in which they function. Understanding these reasons may help you in salary negotiation with your manager. The following are the common reasons for a salary hike:

• Displaying a good work ethic and positive attitude: A positive attitude and a strong work ethic can help you influence and improve the performance of your colleagues. Managers reward employees who uphold ethical standards and are diligent, as this fosters productive engagement within the organisation.

• Inspiring and challenging your colleagues: Employees who exhibit leadership abilities and understand their teammates' motivations are likely to be the next generation of managers and senior staff. A salary hike is one way to motivate them to stay with the company.

• Being proactive: Performing tasks without being asked and trying to boost your skills and knowledge can help you become a greater asset to the company. When you are proactive and can identify what the company has set as a criterion for a salary hike, you can fulfil them and increase your prospect of receiving an increment.

5 questions to ask yourself before a hike

1. What makes me deserving of a hike?

By asking yourself why you deserve a raise, you can determine your major objectives. Perhaps you deserve a raise because of the value you bring to the company, or you wish to earn additional money to increase your disposable income. When requesting a salary increase, it is crucial to exhibit your value to the organisation. If you believe that you deserve a salary hike, it can be easier to convince your employer for the same. With the following tips, you can request an adequate raise:

• Compare your compensation to the national average for the same role. This can help you establish a starting point for salary negotiations.

• Compile a list of initiatives you have taken, your skills and expertise that can benefit the company and use it to determine your eligibility for a raise.

2. When was the last time you received a salary hike?

• Collect all information about your work history and increasing responsibilities, including dates and amounts of previous hikes.

• Compile a list of your significant accomplishments and completed projects since your last salary hike.

3. Is it a suitable time to ask for a salary hike?

The timing of your salary hike request can have a significant impact on the outcome. Businesses experience many ups and downs and requesting a raise at the wrong time can not only make it more difficult for your employer to approve your request, but it can also show that you are unaware of such significant business changes. Consider the following tips when determining if it is an appropriate time to request a raise:

• You may request a salary increase immediately following a significant accomplishment or after a period of success.

• Explore the business's profits and losses, and strategically time your salary hike request.

4. How much of a salary hike do you deserve?

The employer may ask this as the first question in response to your salary hike request. It is critical to prepare an answer for this in advance and bring research-based numbers to your meeting. Consider the following guidelines when determining how you can respond to this question:

• Consider the national average salary for your position and how it compares to your current compensation.

• Consider this question in the same way that you would handle the interview question, "What are your salary expectations?”

Read more: Salary Negotiation Tips And Examples

5. Have you shown enough value to the business?

Your employer may assess your worth considering the new compensation. If you can demonstrate an increase in value, you may have a better chance of receiving a raise. These tips can assist you in demonstrating your worth when making a salary raise request:

• Consider how you have provided value to the business and discuss these points with your employer when discussing a salary increase.

• Calculate your worth based on your roles and responsibilities and you may use this information to discuss your worth.

Useful tips for requesting a salary hike

Here are some tips for asking for requesting a salary hike:

Plan and rehearse the agenda

Prepare well before the meeting with your supervisor. Make a list of all compelling reasons why you deserve the hike. You may write them down and even learn them to deliver a convincing presentation. Apart from listing your major accomplishments, including additional responsibilities you have taken, strategies you have implemented, projects you have managed and how you plan to assist the department in meeting its objectives in the future. It is advisable to have a written copy of the same with you in case your manager wishes to discuss the matter with other supervisors.

Request a meeting

In-person meetings are often more effective than telephonic or email ones. Ask your manager if they could be available for a meeting to discuss your salary hike. If a face-to-face discussion is not possible, send a salary hike request through email, and raise a request to have a meeting whenever it is convenient for your senior.