Yesterday I showed you why your employer may have had to have raised the deductible and out of pocket maximum on your high deductible health plan for 2024.

You’ve also heard how much your pay raise for 2024 will be. But while your new insurance bills kick in January 1st, your pay raise won’t be paying out until early April or some other non-January 1st timeline, and inflation has been increasing the costs of all of your other expenses constantly.

So what are some comparisons we can make, to figure out how much of a raise you’re really getting, or not getting?

Calculating in dollars

My preferred method, to get away from the confusion that percentages are to most people, is to calculate the actual dollar amount you’ll be getting extra in earnings in 2024, vs the known dollar amount you’re paying extra in 2024 for your work-related benefits.

For your earnings, if you’ll have 21 paychecks with the new amount, and that new amount is an extra $100/paycheck, then you’ll be earning an extra $2100.

For your expenses, first you have to figure out what you want to count. Not every family’s answer is going to be the same. Here are some that may fit your situation:

• Health insurance premiums
• Health insurance out of pocket maximums
• HSA or HCFSA contributions
• Other insurance premiums (legal, hospital indemnity, critical illness, etc)
• 403b/401k contributions
• 457b contributions
• IRA contributions

Figure out how much the cost of each of these is going up for 2024, and add those up.

Now compare the dollar amount of your additional work-related expenses, vs your additional work-provided income.

How’d that look? How did that make you feel? For my family, that alone broke even; which means every inflationary expense outside of work is a pure pay cut for my family for 2024.

Need other reasons to stay away from percentages in your calculations?

A 5% raise sounds good, right? If you’re earning $15 per hour working at Burger King, a $2/hour raise would actually be 13.3% raise. 5% would only be a $0.75/hour raise. Meanwhile for someone making $400,000/year, a 2% raise would be $8,000.

Here’s another one for you. I don’t remember the details, as I don’t do spectator sports, but one of my friends in grad school back in the early 2000’s was very indignantly telling me back then about sports payments for male vs female players. My friend was good at math, and rightly pointed out that while the claim was that the organization was working to shrink the pay disparity between player genders and was therefore giving x% raise to males, and x+y% raise to females, because y% was not big enough, the actual dollar amount in difference in pay was going to continue to grow.

Other catches

If your employer gave tiered percentages, such as qq% for pay $x-y/hour, and qq-5% for pay $y+1-z/hour, then beware of another impact. There are some threshold effects, you may find yourself working in 2024 for less than a colleague who you’d out-earned in 2023. That’s right, you may flip-flop your earning status forever going forward.

One more for you. If you have an employer who has a movement of the range and a movement through the range, vs making flat percentage raises as a matter of course, beware what happens when going back to the old standard after having done flat raise for a few years. Say your employer gave a 6% raise in 2023, and a 5% raise in 2024, but only moved the range by 3% each year. That means that if you were at the top of the range before 2023, at the start of 2025 you’d be at 111.3% of the prior range cap. But the new range cap would only be 106%. The way that this then works, you wouldn’t get a pay raise for at least 2 years (2025 and 2026, assuming typical raise percentages), until your pay finally dropped back under the new range cap for 2027. That’s right, two years at least with a 0% raise, built in by your employer by sneaking in this lower range movement.

Wrapping up

Make sure you understand whether you are getting a pay raise or a pay cut for 2024. And that you understand the implications for the years down the road.

If you aren’t happy with your income or benefits, the best way to get more is to change employers, typically about every 1-5 years. Talking to my mentor financial planners this fall about the current employment markets, 10-20% of a pay bump is common, and a 50% increase isn’t out of the realm of possibility. Figure out what you’re worth, and then go after it, because employers know and take advantage of the tendency to go with the flow, especially if your current job has you worn out, behind, and burnt out.