Companies are preparing to roll out an average salary hike of 9.1 per cent in 2026, signalling a shift towards skills-based pay structures rather than uniform annual increments, according to the fourth edition of the EY Future of Pay report. As reported by MINT, the figure represents a slight moderation from 9.3% in 2025 and 9.4% in 2024, reflecting sustained cost discipline and greater normalisation of salary budgets. Abhishek Sen, EY India's Partner and Leader for Total Rewards, emphasizes that future pay strategies are defined not just by increment size, but by the precision in identifying skills to invest in and outcomes to reward. The findings are based on inputs from 178 companies across 16 sectors in India, with the report emphasizing that "the future of pay in India is no longer defined by the size of the annual increment alone. It is increasingly about precision – deciding which skills to invest in, which outcomes to reward, and how to balance competitiveness with sustainability."
Global Capability Centres (GCCs) are expected to lead salary growth with projected increments of 10.4 per cent, reflecting sustained global demand for specialised digital skills. Financial services firms are likely to follow with hikes of around 10 per cent, while e-commerce companies may see 9.9 per cent increases and life sciences and pharmaceuticals 9.7 per cent, according to the EY report. The report indicated that attrition levels are gradually stabilising, declining to 16.4 per cent in 2025 from 17.5 per cent in 2024. Financial services recorded the highest attrition at 24 per cent, particularly in sales, relationship management and digital roles, while professional services followed at 21.3 per cent and Hi-Tech and IT stood at 20.5 per cent. "Engineering, Manufacturing, Automotive and Infrastructure sectors continue to moderate, with increments trending below prior years, reflecting cautious capex cycles, utilisation pressures and tighter margin discipline," according to the report. As per MINT, India's new Labour Codes are prompting organisations to reassess wage structures and statutory obligations, with companies conducting cost modeling exercises and preparing structured communication strategies to manage employee impact.
Financial services recorded the highest attrition at 24 per cent, particularly in sales, relationship management and digital roles. Professional services followed at 21.3 per cent, while Hi-Tech and IT stood at 20.5 per cent. GCCs reported relatively lower attrition at 14.1 per cent, underscoring growing workforce stability in the segment. More than 80 per cent of exits remain voluntary, suggesting job changes continue to be opportunity-driven rather than restructuring-led, as noted in the EY report. The report further revealed that India's new Labour Codes are prompting organisations to reassess wage structures and statutory obligations, with companies conducting cost modeling exercises and preparing structured communication strategies to manage employee impact. As per MINT, the Union Budget 2026 reinforces workforce competitiveness through tax stability, investments in skilling, incentives for digital infrastructure and sustained public capital expenditure.
With artificial intelligence adoption accelerating, compensation models are increasingly aligned with measurable business impact and specialised expertise. Between 50–60 per cent of large organisations now use analytics in compensation planning, making data-led pay decisions central to rewards strategy. The report noted a sharp rise in data-led compensation planning, with 50–60% of large organisations now using analytics to guide pay decisions, while adoption of AI across rewards and learning functions has tripled over the past two to three years. Nearly 45–50 per cent of surveyed organisations are shifting towards skill-based pay frameworks, marking a structural change in India's compensation landscape. People with skills in artificial intelligence (AI), generative AI, machine learning, and engineering can command up to a 40 per cent skill premium. The EY report also highlighted that "the gap between high and average performers widened, with top company talent earning 120-150% of payouts, while average performers are receiving 60-80% payouts." As per MINT, rewards strategies are becoming more deliberate, with sharper differentiation and better use of data to guide decisions, as employees increasingly want clarity, fairness, and consistency in how pay decisions are made. Variable pay is rising to 16.1% of fixed compensation in 2025, reflecting a steady shift towards at-risk structures that link earnings to productivity, adoption and strategic impact. The trend towards sophisticated, data-driven compensation strategies is set to accelerate, with 60% of Indian employers aiming to leverage AI for salary benchmarking, pay equity analysis, and personalized benefits by 2028.
Companies are reshaping long-term incentive plans (LTIPs) to strengthen retention and align compensation with performance. About 30 per cent of firms now run two or more LTI plans simultaneously, while ESOP adoption rose to nearly 78 per cent in 2025, up from about 71 per cent in 2024. Nearly 75 per cent of NSE 200 companies now offer LTIs, making them a standard component of CEO compensation. Median CEO pay in Nifty 200 companies reached ₹7–9 crore in 2025, reflecting a 12–15 per cent year-on-year increase. On average, 25-30 per cent of total CEO pay is fixed, while short-term incentives contribute another 25-30 per cent, and long-term incentives account for 45-50 per cent, emphasising performance-linked compensation. The integration of ESG-linked KPIs into leadership variable pay is also emerging, as seen in 35% of large organizations. COOs and CFOs emerged as the highest-paid roles after CEOs, as reported by The Economic Times. Long-term incentives have become essential for retaining high-impact talent, with time-bound allowances and differentiated long-term incentives becoming preferred mechanisms to attract and retain critical digital and AI-led skills without permanently inflating fixed pay. 40–45% of CEO transitions over the last 5 years have been internal promotions, signalling a preference for homegrown leadership talent.