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Salary Increase Calculator (Raise, Compa-Ratio and Merit Budget)
Raise calculator spreadsheet: percent-to-dollar raises, hourly-to-annual, compa-ratio, range penetration, a 3.5% merit pool split and mid-year proration.
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What you get
- Eight raise formulas written out in plain Excel-style text, each with a worked example
- Compa-ratio and range-penetration math so you can see where a raise lands in the band
- A five-person merit allocation that spends a 3.5% pool to the dollar
- Proration rules for mid-year hires and guidance on promotion versus merit increases
- A blank team worksheet for your own review cycle
Template preview
A preview of the structure. Download the PDF or CSV for the complete, ready-to-use version.
Inputs
- Current annual salary— or hourly rate x scheduled weekly hours x 52
- Proposed increase %— or proposed new salary if you are working backward
- Band minimum / midpoint / maximum— from your salary structure for this job level
- Merit budget %— approved pool as a % of eligible base salaries, e.g. 3.5%
Raise formulas with worked examples
Every example below has been calculated in full. Replace the inputs with your own numbers.
| Calculation | Formula | Example inputs | Result |
|---|---|---|---|
| Percent raise to new salary | Current salary x (1 + raise %) | $62,000 at 4% | $2,480 raise; new salary $64,480 |
| New salary to percent raise | (New salary - current salary) / current salary | $58,000 to $63,800 | $5,800 / $58,000 = 10.0% |
| Hourly to annual | Hourly rate x 2,080 (40 hrs x 52 weeks) | $24.00/hr | $49,920 per year |
| Hourly raise, annualized | Hourly rate x (1 + raise %) x 2,080 | $24.00/hr at 3.5% | $24.84/hr; $51,667.20 per year |
Reading compa-ratio and range penetration
Compa-ratio tells you how pay compares with the market rate for the job (the midpoint). Range penetration tells you how far through the band someone has moved. Use both: a 0.92 compa-ratio and 29% penetration says this person is paid below market and has plenty of room to grow.
Compa-ratio guide
| Compa-ratio | Typical meaning | Merit implication |
|---|---|---|
| Below 0.90 | New to role, still developing, or underpaid | Larger increase if performing well; check for pay equity gaps |
| 0.90 to 0.97 | Approaching market rate | At or slightly above the average merit % |
| 0.97 to 1.05 | At market for a fully proficient employee | Average merit % for solid performance |
| 1.05 to 1.15 | Above market; experienced or top performer | Smaller percentage increase; consider a lump sum |
Merit budget allocation: 3.5% pool, team of five
Eligible base salaries total $375,000, so the pool is $375,000 x 3.5% = $13,125. Individual increases vary by performance and position in band but the total spend equals the pool exactly.
| Employee (rating, position in band) | Current salary | Increase % | Increase $ | New salary |
|---|---|---|---|---|
| A (Meets, high in band) | $90,000 | 2.00% | $1,800 | $91,800 |
| B (Exceeds, mid band) | $80,000 | 3.50% | $2,800 | $82,800 |
| C (Exceptional, low in band) | $75,000 | 6.00% | $4,500 | $79,500 |
| D (Meets, mid band) | $70,000 | 2.75% | $1,925 | $71,925 |
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How to use this template
- 1
Enter the inputs
Fill in current pay, the band minimum, midpoint, and maximum, the approved merit budget percentage, and each employee's eligibility start date.
- 2
Check position in band first
Calculate compa-ratio and range penetration before picking a percentage, so an underpaid strong performer gets more than someone already near the band maximum.
- 3
Allocate the pool
Draft individual increases in the team worksheet, then total the dollars and compare them with salary base x budget percentage.
- 4
Prorate and finalize
Apply proration to anyone hired partway through the review period, confirm no new salary exceeds the band maximum, and send numbers to payroll with the effective date.
Frequently asked questions
How do I calculate a raise percentage?
Subtract the current salary from the new salary and divide by the current salary. Going from $58,000 to $63,800 is a $5,800 increase, and $5,800 / $58,000 = 10.0%. To go the other way, multiply the current salary by 1 plus the raise percentage.
What is a good compa-ratio?
Around 1.00 means pay equals the band midpoint, which is usually set at market rate for a fully proficient employee. Between 0.90 and 1.10 is normal for most of a workforce; below 0.90 often signals someone new to the role or underpaid, and above 1.10 means they are paid well above market for the job.
What is the difference between compa-ratio and range penetration?
Compa-ratio compares salary to the midpoint only. Range penetration shows where salary sits between the band minimum (0%) and maximum (100%). Two employees with the same compa-ratio can have different penetration if their bands are different widths.
What is a typical merit increase budget?
US salary-increase budgets have mostly landed in the 3 to 4% range in recent years, based on surveys from WorldatWork, Mercer, and others. Check the latest survey data for your industry and region before setting your own pool, since it moves with inflation and labor market conditions.
How do you convert hourly pay to annual salary?
Multiply the hourly rate by 2,080, which is 40 hours x 52 weeks. $24.00 an hour is $49,920 a year. For part-time employees, use their scheduled weekly hours x 52 instead of 2,080.
Should a mid-year hire get a full merit increase?
Most employers prorate by months in the review period, so someone with 9 of 12 months gets 75% of the merit they would otherwise earn. Some skip proration when the hire's starting salary was already set at current market rate. Whatever you choose, apply it consistently and publish the cutoff date.