A salary hike is an increase in your compensation, typically received during an annual performance review or when changing jobs. While the percentage might look good on paper, its real benefit depends on whether it outpaces inflation and overcomes higher tax liabilities.

• It compares your current salary against your new, post-hike salary.
• It calculates the nominal hike percentage based on the numbers you provide.
• It then adjusts this gain for the current inflation rate to reveal the true increase in your purchasing power.
• The result is your **real salary growth**, a more accurate measure of your financial progress.

Many professionals overestimate the impact of salary hikes by ignoring inflation. A nominal gain can often be a real-world loss due to several factors:

• Inflation Erosion: If your hike is 8% but inflation is 6%, your purchasing power only grew by 2%.
• Higher Tax Slabs: A significant hike can push you into a higher income tax bracket, meaning a larger portion of your new income goes to taxes.
• Lifestyle Inflation: A raise often coincides with increased spending, which can neutralize the financial gain.

A simple way to judge your hike:

• Below Inflation: You've effectively taken a pay cut; your money buys less than it did before.
• Slightly Above Inflation: You're just keeping pace. It's neutral, not a real win.
• Clearly Above Inflation: This is a real improvement. Your purchasing power has genuinely increased.