Is my pay keeping up with inflation?

High inflation means take home pay is being eroded in real terms. An online calculator reveals the pay rise you need to match the rising cost of living - and how much worse off you are without it.

woman looking at paperwork
(Image credit: © Getty Images)

An online calculator reveals how big a pay rise you need to keep up with inflation amid the rising cost of living.

As inflation currently stands at 8.7%, households continue to struggle to keep ahead of record food prices and soaring costs for clothes and other bills.

The calculator from the Office for National Statistics (ONS) allows people to enter their salary to find out how much more they need to earn to maintain their current standard of living.

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The calculator also reveals how much worse off you will be if your pay is only increased in line with the current average wage growth of 6.7%.

The online tool allows workers to calculate a personal salary increase they can use in negotiations with their employer when asking for a pay rise.

For example, a headteacher on an average salary of £68,000 would need a rise of £5,304 next year to bring them up to £73,304 in order to keep up with the current inflation rate.

If their salary is only increased in line with wage growth the headteacher will receive a pay rise of £3,944 instead - taking them up to £71,944. It means their pay packet would be worth £1,360 less per year.

Meanwhile, a chief financial officer earning £100,000 would need a rise of £7,800 next year to bring them up to £107,800 in order to keep up with the current inflation rate.

If their salary is only increased in line with wage growth the headteacher will receive a pay rise of £5,800 instead - taking them up to £105,800. In this instance their pay packet would be worth £2,000 less per year.

But it’s worth remembering that everyone's personal inflation rate will be different, says Rebecca O’Connor, director of public affairs at PensionBee. "We all earn, spend, save and invest differently and so inflation affects us all differently, too,” she explains.

This means not everyone will need the same increase in income to keep their spending power.

O’Connor says: "Anyone on a low income may find inflation harder to bear because the proportion of their income spent on things like food (at a 45-year high of 19.1%) and energy (thankfully on its way down a bit) is relatively high. Pensioners often struggle, as a group mostly on low fixed incomes, who spend very little, relatively, on discretionary items, like restaurants or holidays, for instance.

She adds: "Those on higher incomes tend to spend proportionally less on the basics, so are cushioned from the worst effects of inflation by their higher disposable income.”

Why securing a pay rise matters - for your savings and investments

We all earn, spend, save and invest differently and so inflation affects us all differently.

Not only can a with-inflation or above pay rise mean you won’t feel the impact of higher prices but it can counteract - or at least partly counteract - what inflation is doing to your savings and investments.

“Unfortunately inflation can quickly erode the value of savings, especially if they aren't earning much interest, and also investments, if the growth is failing to keep pace with inflation. So people with a lot in savings that isn't earning much are also seeing that be eroded,” explains O’Connor.

"On the other hand, if you have debt with relatively low interest charges, inflation has the effect of eroding the value of the debt. This won't be of much comfort to you if your pay hasn't risen accordingly - you still have to pay off the debt, after all. It's also not much use if that debt is a mortgage and house prices haven't risen with inflation (which they haven't), but inflation can be a small mercy for those with borrowings as the money you use to pay it back with is worth less over time."

Katie Binns

Katie is deputy editor of Times Money Mentor and long-time contributor to the Sunday Times where she started on the Irish desk in 2012 and spent 10 years covering news, culture, travel, personal finance and celebrity interviews. 

Her investigative work on financial abuse has examined the response of banks, the Financial Ombudsman and the child maintenance service to victims, and resulted in a number of debt and mortgage prisoners being set free - and a nomination for Best Finance Story of the Year at the Headline Money awards in 2021 and 2022. 

Katie was also shortlisted for Freelance Journalist of the Year at the Headline Money awards in 2022, 2023 and 2024 and won Personal Finance Journalist of the Year at The British Bank Awards 2022.