Raises in the United States mostly work as discretionary decisions your employer makes once a year, sized against your performance, the company’s budget, and what the market is paying for your role. Average wage growth was about 3.3% for the twelve months ending in December 2025, and individual raises cluster around that figure with meaningful variation above and below.1Bureau of Labor Statistics. Employment Cost Index Summary – 2025 Q04 Results A handful of legal rules set the outer edges — minimum wage floors, union contracts, individual employment contracts, and equal pay laws — but within those edges, whether and how much you get is your employer’s call.
Why Most Raises Are Discretionary
Most U.S. workers are employed at will. That means your employer can change your wages, benefits, or other terms of employment without advance notice, and there is no general legal right to an annual raise. An employer can freeze pay indefinitely, give different raises to different employees, or skip raises altogether. The limits: pay cannot fall below the applicable minimum wage, and decisions cannot be based on a protected characteristic like race, sex, or age.
Raises become mandatory only when a specific law or agreement locks one in. Federal and state minimum wage laws set a floor. Collective bargaining agreements can require raises on fixed schedules. Individual employment contracts, common in executive and specialized roles, may guarantee periodic increases. Everything else is a business decision.
The Common Types of Raises
A merit raise rewards your individual performance over a set period, usually tied to a formal review. Your manager evaluates your work against goals, and the size of the raise reflects how well you met them. This is the most common way employers differentiate between people doing the same job at different levels of output.
A cost-of-living adjustment, or COLA, is meant to keep your purchasing power steady as prices rise. These adjustments are pegged to an inflation measure, most commonly the Consumer Price Index for Urban Wage Earners and Clerical Workers.2Social Security Administration. Cost-of-Living Adjustment (COLA) Information A COLA is not a performance reward. It keeps real wages from shrinking as prices climb.
A market adjustment brings your pay in line with what other employers are paying for similar work. Employers periodically compare their pay scales against salary surveys. If your role is underpaid relative to the market, you may get a bump that has nothing to do with your performance.
A promotion raise accompanies a move to a higher-level role with greater responsibility. These tend to be larger than annual merit increases because the new position sits in a different salary band. The raise resets your pay to the range associated with the new grade rather than adding a percentage to your current salary.
How Much a Typical Raise Is
Wages and salaries for civilian workers grew 3.3% over the twelve months ending in December 2025.1Bureau of Labor Statistics. Employment Cost Index Summary – 2025 Q04 Results Industry surveys project a similar average salary-increase budget of about 3.6% for 2026, with roughly 3.3% earmarked for merit increases and smaller portions for market and equity adjustments.
Individual raises vary. A strong performer might get 4% to 5%. Someone who meets but does not exceed expectations might get 2% to 3%. Employers use salary bands — a minimum and maximum pay range for each job grade — to keep raises within budget and maintain internal fairness. If you are already near the top of your band, your raise may be smaller even with excellent performance, because the employer wants to keep pay for that role inside the set range.
When Raises Typically Happen
Most employers review compensation once a year, often at the end of a fiscal or calendar year so new salary expenses line up with the upcoming budget. Some companies conduct reviews on your work anniversary date instead, spreading the administrative load across the year.
Milestone reviews are also common. Many employers evaluate your pay after a probationary period — often 90 days — or after reaching a set tenure threshold. Employment contracts and employee handbooks often spell out when these reviews occur. A scheduled review does not guarantee a raise, but it does give you a set moment to make your case.
When the Law Actually Requires a Raise
Minimum Wage Increases
The federal minimum wage is $7.25 per hour and has not changed since 2009.3Office of the Law Revision Counsel. 29 USC Chapter 8 – Fair Labor Standards Most states and many cities set higher minimums, and those rates are updated regularly. When a state or local minimum wage rises, your employer must increase your pay to at least the new rate by the effective date. The Fair Labor Standards Act requires you to be paid whichever minimum — federal, state, or local — is highest.
Union Contracts
If you are covered by a collective bargaining agreement, your raise schedule is usually written into the contract. These agreements often specify exact dates, dollar amounts, and percentages the employer must honor regardless of individual performance.4National Labor Relations Board. Bargaining in Good Faith With Employees Union Representative An employer cannot unilaterally change wages during the term of the agreement without the union’s consent.
Individual Employment Contracts
Outside the union context, an individual employment contract can also lock in guaranteed raises. These are most common for executives, physicians, and other specialized professionals. If your contract states that your salary increases by a set percentage on a specific date, that clause is enforceable. Failing to honor it is a breach of contract, and you can pursue the unpaid difference plus any additional remedies the contract provides.
Equal Pay Rules Apply to Raises
Federal law prohibits using raises to create or maintain pay gaps based on sex. The Equal Pay Act requires employees doing substantially equal work — measured by skill, effort, responsibility, and working conditions — to receive equal pay regardless of sex.5EEOC. Equal Pay Act of 1963 A pay difference is allowed only when it rests on seniority, a merit system, a system measuring output, or another factor genuinely unrelated to sex.
Criteria like seniority, education, or experience are acceptable only if applied equally across sexes.6eCFR. 29 CFR Part 1620 – The Equal Pay Act If an employer discovers it has been violating the Act, it must raise the lower-paid group’s wages. It cannot close the gap by cutting anyone’s pay.5EEOC. Equal Pay Act of 1963 A growing number of states, along with the District of Columbia, have also enacted pay transparency laws that generally require salary ranges in job postings, making it easier to check whether your pay is in line with what your employer offers for your role.
What Changes on Your Paycheck
Federal Income Tax Withholding
A raise increases your gross pay, and payroll automatically recalculates federal income tax withholding based on the higher amount using your Form W-4.7Internal Revenue Service. Publication 15 (2026), Circular E, Employers Tax Guide A common worry is that a raise will push you into a higher bracket and leave you worse off. It won’t. The U.S. uses marginal tax brackets: only income above a bracket threshold is taxed at the higher rate, and everything below stays at the lower rates.
Say you are single and earn $50,000 before a raise. All of that income sits at 12% or below. A $5,000 raise brings you to $55,000. Only the $4,600 above the $50,400 threshold for the 22% bracket is taxed at 22%; the rest stays where it was.8Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Take-home pay always goes up with a raise.
Social Security and Medicare
You and your employer each pay Social Security tax at 6.2% on earnings up to $184,500 in 2026.9Social Security Administration. Contribution and Benefit Base Once your wages pass that cap, you stop paying Social Security tax on the excess for the rest of the year. Medicare tax, at 1.45%, has no cap and applies to every dollar you earn.
Your Overtime Rate
If you are eligible for overtime, a raise automatically increases your overtime rate. The FLSA requires overtime to be paid at one and one-half times your regular rate, which includes your base pay.3Office of the Law Revision Counsel. 29 USC Chapter 8 – Fair Labor Standards When your base pay goes up, the regular rate goes up with it, and every overtime hour worked after that point must be calculated using the new rate.10U.S. Department of Labor. Fact Sheet 56A – Overview of the Regular Rate of Pay Under the FLSA If your hourly rate goes from $20 to $22, your overtime rate moves from $30 to $33. This is one reason employers usually align raises with the start of a new pay period.
How the Raise Reaches Your Paycheck
Once a raise is approved, your manager notifies HR, which updates your record in the payroll system with the new pay rate and effective date. The effective date, when the higher rate starts accruing, is usually the first day of a pay period. The pay date, when the money hits your account, follows whatever schedule your employer uses. Your next pay stub will show higher gross pay and a matching increase in tax deductions.
If the raise is retroactive — applying to work you already performed before the approval date — the back pay is taxed as regular wages in the year it is paid, not the period it covers.11Internal Revenue Service. Publication 957, Reporting Back Pay and Special Wage Payments
Federal law does not require advance written notice before your pay rate changes, whether up or down.12U.S. Department of Labor. Handy Reference Guide to the Fair Labor Standards Act Several states have their own notice laws that do require written notice, and those apply to raises as well as pay cuts. Employers must keep payroll records — pay rate, hours worked, earnings — for at least three years under federal law, with supporting time and earnings records kept for at least two.13eCFR. 29 CFR Part 516 – Records To Be Kept by Employers Keep your own copies of offer letters, pay stubs, and any written communication about a raise. If you ever need to prove a promised raise was not applied, that documentation is what the Department of Labor or a court will look for.
How to Ask for One
Timing matters. The strongest moment to ask is during or just before a scheduled performance review, when your manager is already evaluating your contributions and the company has budgeted for raises. Other good openings include right after a major accomplishment: closing a significant deal, delivering a high-visibility project, or taking on substantially more responsibility than your current role requires.
Before the conversation, research what comparable roles pay in your market. Salary data from the Bureau of Labor Statistics and industry surveys gives you an objective baseline. Document your specific achievements with measurable results: revenue generated, costs saved, projects delivered, problems solved. Frame the request around the value you bring rather than personal financial needs.
If the employer cannot meet your number, ask whether a future raise can be tied to specific, measurable goals you both agree on. You can also negotiate non-salary compensation — additional paid time off, a one-time bonus, remote work flexibility, or professional development funding — that improves your total package even when base salary stays put.