How To Calculate Salary Increment Percentage
9 minutes read

How To Calculate Salary Increment Percentage

A salary increment is an important part of employees’ yearly working, that considers the efforts of employees towards their work and their learning abilities in terms of salary increment or salary hike that is determined as a percentage of salary increment or new salary.

To know the various aspects of increment, in this blog, we will discuss how to calculate salary increment percentage.

What is Salary hike?

A salary hike also known as a salary increment is the increase in an employee’s salary based on performance, such as KPIs (Key Performance Indicators), KRAs (Key Responsible Areas) and other contributors. Salary increment measures the monthly or yearly increase from an employee’s current salary to an updated salary. The increase is represented as a percentage of the current salary. This is called as an increment or hike percentage.

How to determine salary increment?

Salary increment is dependent upon state economic conditions, cost of living, inflation and other factors such as industry and company policy. Some of the factors are –

  • Financial conditions of the organisation
  • Economic growth of the organisation
  • Condition of market value and standards
  • Salary increment budget for the department and service
  • Employee’s service tenure
  • Employee’s qualification, such as any certification, niche role and others.

How to calculate salary increment percentage?

Every organisation calculates the salary increment based on the employee’s current salary, new salary and hike percentage, which can be either shown as a percentage or an absolute amount of their monthly gross salary.

Before providing the salary or increasing the salary of the employee, you need to know the following terms and formula, which will help you to understand and calculate the salary and salary increment percentage.

  • Net income is your actual income after deduction of all taxes, PF, ESI and others.
  • Gross income is your entire income including all taxes, PF, ESI and others.
  • Take – home or In – hand income is your total net salary.

Salary increment percentage formula and salary calculation formula

Let’s see the salary increment calculation.

Salary increment calculation formula –

Salary Increment Percentage = (New salary OR wages – Old Salary)/ (Old Salary) * 100

Salary calculation formula –

New Salary = Current Salary OR wages * Salary Hike Percentage + Current salary

Calculation of Salary Increment percentage

Suppose, you are providing a new salary to the employee of Rs.50,000, and their old salary was Rs.40,000. Calculate the percentage of salary hikes.

Salary Increment Percentage = (New salary/wages – Old Salary)/ (Old Salary) * 100

= (50,000 – 40,000)/(40,000)*100

= (10,000)/40,000*100

= 0.25*100

= 25%

Calculation of salary increment

If you are providing a salary increment of 25% of employees’ current salary. Calculate the new salary increment of the employee.

New Salary = Current Salary/wages * Salary Hike Percentage + current salary

= 40,000 * 25%

= 10,000 + 40,000

= 50,000

So, now you can see how we got the same thing in two different ways.

To easily calculate salary increments in bulk and access other convenient features, simply click on Saral PayPack


How to calculate a 30% hike on Rs.30,000 salary?

A 30% salary increment will calculate are as follow –

New Salary = Current Salary/wages * Salary Hike Percentage + current salary

= 30,000 * 30%

= 9,000 + 30,000

= 39,000

So, 39,000 will be the new salary.

This brings us to the end of our discussion on how to calculate salary increment percentage. Let us know if you have any other questions and opinions on this topic. Mention the comment box below.

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