Updated 24 October 2026
Quick answer: In 2026, a typical annual raise for someone staying in the same job is about 3% to 4% in the US, the UK and Canada, around 2.5% in the euro area, about 5% in Japan and around 9% in India, where inflation is also higher. Whether a raise is "fair" depends mostly on three things: inflation, your performance, and what the market pays for your role. To check your real raise, divide 1 plus your raise by 1 plus inflation and subtract 1. With US inflation at 3.7% in September 2026, a 3.5% raise is a small cut in real terms, while a 5% raise is a real gain of about 1.3%. Strong performers commonly receive one and a half to two times the average raise, promotions usually bring 10% or more, and people who change employers have recently earned slightly larger increases than those who stay. If your raise is below inflation and below the market, you have good grounds to ask for more.
The annual pay review is one of the few moments each year when most employees find out what their employer thinks they are worth. It can bring relief, disappointment or confusion. A 4% raise sounds generous until you notice that prices rose by almost as much; a 2% raise might be fair at one company and an insult at another.
This guide explains how to judge a raise properly: how to adjust it for inflation, what typical raises look like in different countries and situations, why some people get much more, how to find out what your role pays, and how to ask for more if your raise falls short.
Nominal Raises and Real Raises
The number in your pay letter is your nominal raise: the percentage increase in the amount of money you are paid. What matters for your standard of living is your real raise: how much more you can actually buy, after allowing for higher prices.
The calculation is simple:
Real raise = (1 + nominal raise) ÷ (1 + inflation) − 1
For example, with a 5% raise and 3.7% inflation: 1.05 ÷ 1.037 = 1.0125, a real raise of about 1.25%. For small numbers, simply subtracting inflation from the raise gives a close answer (5% − 3.7% = 1.3%), but the full formula is more accurate when inflation is high.
If your raise is lower than inflation, your real pay has fallen, even though your payslip shows more money. In 2022, when inflation was 8% to 10% in many countries and typical raises were 4% to 5%, most workers in rich countries took real pay cuts of several percent.
Which Inflation Figure Should You Use?
Use the official consumer price inflation rate for your country over the most recent 12 months, which statistics offices publish monthly. In September 2026 it was 3.7% in the US, 3.5% in the UK, 3.8% in the euro area and 5.5% in India.
Two refinements help:
- Use the period since your last raise. If your last raise was 18 months ago, compare your new raise with inflation over 18 months, not 12.
- Consider your own inflation. If you rent, have a long commute or spend a large share on food and energy, your personal cost of living may have risen faster than the average.
Be aware that inflation figures move a lot. A raise that looked good when inflation was 2.5% in 2025 can look much less generous after the 2026 energy price spike pushed inflation up again.
What Is a Typical Raise in 2026?
Employers plan raises using salary budgets, which surveys by consulting firms track closely. Here is the picture for 2026 and 2027:
- United States: total salary increase budgets averaged about 3.5% in 2026, according to WTW and Mercer. Mercer's mid-2026 survey found employers planning a 3.2% average merit increase and 3.5% total for 2027. High-tech and banking budgets are a little higher, consumer goods lower.
- United Kingdom: average regular pay was growing at about 3.7% a year in mid-2026, according to the Office for National Statistics, with public sector pay rising much faster than private sector pay.
- Canada: Mercer projects 3.0% merit and 3.2% total increases for 2027.
- Euro area: negotiated wages were rising by about 2.4% a year in mid-2026, down from more than 5% in 2024.
- Japan: the 2026 spring wage negotiations, known as shunto, produced average raises of 5.01% at unionised companies, the third year in a row above 5%, though smaller firms gave less.
- India: salaries rose about 9% on average in 2026, and Aon projects 9.1% for 2027, with lower increases in IT services.
Averages hide a wide spread. In most organisations, raises are distributed by performance and position in the pay range, so some people receive nothing and others receive double the average.
Why Some People Get Much Bigger Raises
Performance
In companies with merit pay, the highest-rated employees commonly receive one and a half to two times the average raise, while those rated below expectations may get little or nothing. If the budget is 3.5%, a top performer might receive 5% to 7%.
Position in the pay range
Most medium and large employers have salary ranges for each job. Someone paid near the bottom of the range for good work usually gets a bigger raise than someone already near the top, to move them towards the middle. HR teams often use a "compa-ratio", your salary divided by the midpoint of the range, to guide this. A compa-ratio below about 0.9 is a sign you may be underpaid.
Promotion
A promotion to a more senior job usually brings a raise of 10% to 15%, sometimes more. That is why the most effective way to raise your pay quickly is often to aim for a bigger role rather than a bigger annual raise.
Scarce skills
Employers pay more to keep people whose skills are in demand and hard to replace. In 2025 and 2026 that has included AI and machine learning engineers, cybersecurity specialists, skilled trades in some regions and certain healthcare roles.
Changing employer
People who move to a new employer often negotiate a bigger jump than an annual raise would give. In the US, the Atlanta Fed's wage tracker showed job switchers' pay growing at about 4.4% a year in mid-2026, compared with 3.6% for people who stayed. The gap was much larger in 2022, when switchers gained about 8%, and briefly reversed in early 2025, so the advantage depends on how tight the job market is.
Cost-of-Living Raises and Merit Raises
Some employers give everyone the same "cost-of-living adjustment", often linked to inflation, and then add merit raises on top. Others, especially in the US private sector, have only merit raises from a single budget. Public sector and unionised workers in many countries have pay set by collective agreements or pay review bodies.
It helps to know which system your employer uses. If you receive a single raise from a merit budget, it is reasonable to ask how much reflects performance and how much reflects general pay movements. If you are told your raise "includes cost of living", check whether it actually keeps up with inflation.
What Does Fair Mean?
A raise is reasonably fair if it passes at least one, and preferably more, of these tests:
- The inflation test: does it at least maintain your real pay? For most employees performing well, a raise below inflation is a real pay cut.
- The market test: after the raise, is your pay in line with what other employers pay for similar work, in your location and industry?
- The internal test: is it in line with what colleagues doing similar work at a similar level receive?
- The contribution test: does it reflect what you have delivered and any extra responsibility you have taken on?
A raise below inflation can still be fair if your pay was already well above the market, or if the company is struggling. A raise above inflation can still be unfair if you are significantly underpaid compared with the market or with colleagues.
How to Find Out What Your Role Pays
Good pay information is easier to find than it used to be.
- Job adverts with salary ranges. In the US, states including California, Colorado, New York, Washington and Illinois require employers to include pay ranges in job adverts. The EU's Pay Transparency Directive, which member states had to bring into law by June 2026, requires employers to give candidates pay information and lets employees ask about average pay for similar work.
- Salary surveys and sites such as Glassdoor, Levels.fyi for technology roles, LinkedIn Salary, Payscale and national statistics, for example the US Bureau of Labor Statistics occupational wage data or the UK's Annual Survey of Hours and Earnings.
- Recruiters know current rates well and are often willing to share them.
- Professional associations often publish salary surveys for their members.
- Colleagues and peers. In many countries, including the US and UK, employers cannot lawfully stop you discussing your pay with colleagues.
Compare like with like: the same job level, a similar size of company, the same industry and, above all, the same location. Pay for the same role can vary by 30% or more between cities.
How to Ask for a Bigger Raise
Choose the timing
The best time is usually before budgets are set, often two to three months before the annual review, or after a clear success such as finishing a major project. Once raises have been announced, budgets are usually fixed, though exceptions are possible.
Build your case on value and market
Inflation explains why the issue matters, but employers respond better to evidence about your contribution and the market. Bring:
- specific achievements, with numbers where possible: money earned or saved, projects delivered, problems solved;
- any increase in your responsibilities since your pay was last set;
- market data for your role, location and level;
- a specific figure or range you are asking for.
Say it simply
"Over the past year I've taken on responsibility for the Northern region and delivered the system migration two months early. Based on market data for similar roles, which I've brought with me, I think a salary of $92,000 would reflect the role I'm now doing. Can we discuss that?"
Be ready for "no" or "not now"
If your employer cannot meet your request, ask what you would need to achieve to get there, and when it will be reviewed. Get it in writing if you can. Ask about alternatives: a one-off bonus, extra holiday, flexible working, training or a change of title, which can matter for your next job.
When to Look Elsewhere
If your pay has fallen well behind the market and your employer is unwilling to close the gap, the most effective option may be to look for another job. Signs that it is time include several years of raises below inflation, a large gap between your pay and advertised salaries for similar roles, and promotions that keep being postponed.
Some people use an outside offer to negotiate with their current employer. That can work, but it carries risks: the relationship may change, and studies suggest many people who accept counter-offers leave within a year or two anyway. Only use an offer you would genuinely accept.
Do Not Forget the Rest of the Package
Salary is only part of what you are paid. When comparing offers or judging a raise, consider:
- Bonuses, and how reliably they are paid.
- Pension or retirement contributions: an employer that adds 8% of salary to your pension is paying significantly more than one that adds 3%.
- Health insurance, especially in the US, where the employer's share can be worth thousands of dollars a year.
- Shares or equity, which can be valuable but uncertain.
- Holiday, flexibility and working from home, which save time and commuting costs.
Taxes and Your Raise
The extra pay from a raise is taxed at your marginal rate, the rate on the top slice of your income, which may be higher than your average rate. A raise that takes you into a higher tax bracket does not reduce your total take-home pay, as people sometimes fear; only the part above the threshold is taxed at the higher rate. In a few systems, such as the UK's tapering of the personal allowance between £100,000 and £125,140, the effective marginal rate on a raise can be unusually high, so it is worth checking what you will actually receive.
Why Small Differences Compound Over a Career
A difference of one or two percentage points in your annual raise looks trivial in a single year. Over a career, it is not. Because each raise is applied to a salary that already includes earlier raises, the effect compounds, just like interest on savings.
Consider two people who both start on $50,000. One receives 3% a year, the other 4.5%. After 10 years, the first earns about $67,000 and the second about $77,600. After 30 years, the gap is far wider: about $121,000 compared with $187,000. The second person has also earned hundreds of thousands of dollars more in total along the way, and usually built up a larger pension, because employer contributions and many pension formulas are based on salary.
The same logic explains why the starting salary in a new job matters so much. A higher starting point lifts every future raise, and many employers set raises as a percentage of current pay. Negotiating an extra $3,000 at the start of a job can be worth far more than $3,000 over the years you stay.
It also explains why accepting several years of below-inflation raises is costly. Each year of real pay cuts lowers the base from which every future raise is calculated. Catching up later usually requires a promotion or a move, not just a good year.
Fairness Between Colleagues
Many people judge their raise not only against inflation but against what colleagues receive. That is reasonable: pay differences between people doing the same work at the same level should have a clear reason, such as experience, performance or skills.
Unexplained gaps often appear for less defensible reasons. New hires are frequently paid more than longer-serving staff because the market rate has risen faster than internal raises, a problem known as "pay compression". Gender and ethnic pay gaps also persist in many organisations, even after allowing for job and experience. Large employers in the UK must publish their gender pay gap each year, and the EU's Pay Transparency Directive will require employers to report gender pay gaps and to justify differences of 5% or more in some cases.
If you suspect you are paid less than colleagues doing similar work, gather what facts you can, ask your manager or HR how pay for your role is set, and ask where you sit in the range. Equal pay for equal work is a legal requirement in the US, UK, EU and many other countries, and employers generally take well-founded questions seriously.
Frequently Asked Questions
Is a 3% raise good in 2026?
It is close to average in the US, UK and Canada, but slightly below inflation in the US and the euro area as of September 2026, so in real terms it is roughly flat or a small cut. For a strong performer, it is on the low side.
What raise should I expect with a promotion?
Typically 10% to 15%, and sometimes 20% or more for a major step up or if you were underpaid. Ask how the new salary compares with the range for the new role.
Is it reasonable to ask for a raise outside the review cycle?
Yes, especially if your role has grown significantly or you have evidence that you are paid well below the market. Many employers have some budget for exceptional adjustments.
How do I calculate my real raise?
Divide 1 plus your raise (as a decimal) by 1 plus inflation, and subtract 1. A 4% raise with 3% inflation is 1.04 ÷ 1.03 − 1 = about 0.97%.
Should my raise at least match inflation?
For good performers, that is a reasonable expectation in normal times, but it is not guaranteed. In high-inflation years such as 2022, most employers could not afford to match inflation for everyone.
Is changing jobs the best way to get a big raise?
Often, but not always. Switchers usually gain more when the job market is tight. When hiring slows, as in parts of 2025 and 2026, the premium shrinks, and a promotion at your current employer may be the better route.
Should I accept a bonus instead of a raise?
A one-off bonus is welcome, but it does not raise your base salary, so it does not compound into future raises or, usually, your pension. If you are offered a choice, a permanent raise is generally worth more over time; a bonus can make sense if the company cannot commit to higher fixed costs this year.
Can my employer cut my pay?
Usually not without your agreement, under employment contracts in most countries. A raise below inflation is legal, but a cut in your contractual salary normally needs your consent.
Final Thoughts
A pay raise is not just a number; it is a statement about how your work is valued and whether your living standards will rise or fall over the next year. Measuring it properly, against inflation, the market and your own contribution, turns a vague feeling of disappointment or satisfaction into something you can act on.
If your raise falls short, you do not have to accept it in silence. Gather the evidence, ask clearly for what you think is fair, and be willing to look elsewhere if your employer will not move. Over a working life, a few well-timed conversations about pay can be worth more than years of saving.
Related Guides
- Jobs AI Is Replacing in 2026, and the Skills That Keep You Employed
- How to Strengthen Your Position at Work
- 6 Signs You Need to Quit Your Job
- What Is Inflation? Causes, Types and Effects Explained
- Is an MBA Worth It? A Complete Guide
Salary budget figures are from Mercer (Marsh) and WTW for the US and Canada, the UK Office for National Statistics, the European Central Bank, Japan's Rengo union federation and Aon for India; inflation figures are for September 2026. This article is for education and isn't financial or legal advice.
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