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Methodology

Lifetime Value of a Raise Calculator methodology

Extend an annual raise across a transparent growth and present-value horizon.
Duc Nguyen X.By Duc Nguyen X.ยท Founder, Wage101Last reviewed: View update historyMethodology

Educational only: Work and pay decision support, not tax, legal, financial or career advice.

Privacy: Calculations run locally; Wage101 does not receive your work or pay inputs.

Update policy: Reviewed when formulas or official dependencies change.

Scope: Market-neutral work and pay planning using your own assumptions.

1. Formulas and units

Cumulative nominal value
cumulativeNominalRaiseValue = ฮฃ initialAnnualRaise ร— (1 + annualBaselineGrowthRate)^(year โˆ’ 1)

Where

annualBaselineGrowthRate
Annual baseline growth (decimal/year)Source: User assumption
cumulativeNominalRaiseValue
Cumulative nominal raise value (currency units)Source: Calculated output
initialAnnualRaise
Initial annual raise (currency units/year)Source: Calculated output
Present value
presentValueOfRaise = ฮฃ annualRaise(year) รท (1 + annualDiscountRate)^year

Where

annualDiscountRate
Annual discount rate (decimal/year)Source: User assumption
presentValueOfRaise
Present value of raise (currency units today)Source: Calculated output
Initial annual raise
initialAnnualRaise = selected raise amount, current salary ร— raise rate, or new salary โˆ’ current salary

Where

initialAnnualRaise
Initial annual raise (currency units/year)Source: Calculated output
Ending annual raise
endingAnnualRaise = initialAnnualRaise ร— (1 + annualBaselineGrowthRate)^(horizonYears โˆ’ 1)

Where

annualBaselineGrowthRate
Annual baseline growth (decimal/year)Source: User assumption
horizonYears
Horizon years (years)Source: User assumption
initialAnnualRaise
Initial annual raise (currency units/year)Source: Calculated output
endingAnnualRaise
Ending annual raise (currency units/year)Source: Calculated output

Money inputs and outputs use the currency selected in the scenario without changing the canonical methodology. Pay, time, benefits and work-related costs use the units stated beside each input.

2. Worked example

Input assumptions

Value a 3,000 annual raise over five years with 2% growth and a 4% discount rate.

Calculation and outputs

Example

Value a 3,000 annual raise over five years with 2% growth and a 4% discount rate.

Cumulative nominal raise value
15,612.12 currency units
Present value of raise
13,878.91 currency units
Initial annual raise
3,000.00 currency units
Ending annual raise
3,247.30 currency units

Nominal cumulative value and present value are intentionally separate.

Interpretation

Use cumulative nominal value and present value as different scenario measures.

3. Validation and boundary checks

  • Current salary is positive.
  • Horizon is 1 to 50 whole years.
  • New-salary mode cannot be below current salary.

4. Assumptions and source classification

  • The raise difference grows at the entered baseline rate.
  • Discount rate is a user assumption.
  • The role and raise continue through the horizon.

This calculator has no current policy-data dependency. Its work and pay assumptions are user supplied. Registered family-level regression suites exercise the shared work-logic engine and worked-result reconciliation.

5. Limitations

  • No promotion, job change, tax or probability of staying is modelled.
  • This is not lifetime earnings advice.
  • Future growth and discount rates are uncertain.

This is educational decision support, not personalised tax, legal, financial or career advice. Check the treatment of your circumstances under the rules that apply to you and seek qualified advice where appropriate.

6. Update and evidence policy

Registered family-level suites test formula invariants and example reconciliation; the release ledger records that coverage without claiming a separate oracle for every line of public copy. There is no official threshold or benchmark to refresh for this calculator. Work and pay inputs remain user-supplied because they vary by person, job and contract.

Change history

  1. : Initial public release of the Lifetime Value of a Raise planner and methodology.

Related reading

Use these practical guides to interpret the decision and its assumptions.

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