Paper presents an improved solution algorithm based on Finite Element Method to analyse piled raft foundation. Piles are modelled as beam elements with soil springs. Finite element analysis of raft is based on the classical theory of thick plates resting on Winkler foundation that accounts for the transverse shear deformation of the plate. Four node, isoparametric rectangular elements with three degrees of freedom per node are considered in the development of finite element formulation. Independent bilinear shape functions are assumed for displacement and rotational degrees of freedom. Effect of raft thickness, soil modulus and load pattern on the response is considered. Significant improvement in the settlements and moments in the raft is observed.