How to Calculate Annual Rate of Growth of Salary Increase

by Mike Keenan ; Updated April 19, 2017
A salary increase brings a smile to your face.

When you get a long-awaited raise, your first emotion might be excitement. However, if it's been a while, the percentage annual growth of your salary might make you feel like you deserved a bigger raise. If you know the annual rate of your salary increase, you can make a stronger argument for getting a bigger raise. To figure the average annual raise, you need to know your old salary, your new salary and the time it took to get your raise.

Step 1

Divide your increased salary by your previous salary. For example, if your salary used to be $41,000 and it increased to $46,000, divide $46,000 by $41,000 to get 1.12195122.

Step 2

Divide 1 by the number of years it took to earn the salary increase. For example, if you earned the salary increase after four years, divide 1 by 4 to get 0.25.

Step 3

Calculate the Step 1 result raised to the power of the Step 2 result. Using a calculator, enter the Step 1 result, push the exponent key, enter the Step 2 result and push enter. In this example, raise 1.12195122 to the 0.25th power to get 1.029185109.

Step 4

Subtract 1 from the result to find the annual rate of growth of your salary increase. In this example, subtract 1 from 1.029185109 to get 0.029185109. This means the salary increased by 2.92 percent per year.

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About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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