Mumbai, Feb 23 Indian companies are expected to offer an average salary increase of 9.1 per cent in 2026, as companies move towards more targeted, skills-based compensation strategies amid evolving business priorities, according to a report released on Monday.
Overall, salary increases are projected at 9.1 per cent in 2026, according to the fourth edition of the EY Future of Pay report.
Global Capability Centres (GCCs) are set to lead salary growth in 2026, with projected increases of 10.4 per cent, reflecting sustained global demand and investment in specialized digital capabilities.
Financial services follow closely, at around 10 per cent, with e-commerce at 9.9 per cent and life sciences and pharmaceuticals at 9.7 per cent, making up the top-performing sectors.
This report is based on input from 16 sectors across India, encompassing 178 companies.
Meanwhile, the report revealed that attrition is moving towards gradual stabilization, having declined to 16.4 per cent in 2025 from 17.5 per cent in 2024.
Notably, over 80 per cent of exits remain voluntary, suggesting that talent movement is driven by opportunities rather than restructuring.
Financial services recorded the highest attrition at 24 per cent, particularly in sales, relationship management, and digital roles.
Professional services stood at 21.3 per cent, followed by Hi-Tech and IT at 20.5 per cent.
In contrast, GCCs reported relatively lower attrition at 14.1 per cent, reinforcing their growing stability.
"We are at a turning point in how organizations think about investing in their people. The future of pay in India is no longer solely defined by the size of the annual increment. It is increasingly about precision – deciding which skills to invest in, which outcomes to reward, and how to balance competitiveness with sustainability," said Abhishek Sen, EY India Partner and Leader, Total Rewards, HR Technology and Learning, People Consulting.
Rewards strategies are becoming more deliberate, with sharper differentiation and better use of data to guide decisions, he said.
"At the same time, employees are looking beyond the size of the increment; they want clarity, fairness, and consistency in how pay decisions are made," he added.
As AI adoption accelerates across sectors, compensation models are being recalibrated to better reflect productivity, skill application, and measurable business impact.
Between 50-60 per cent of large organizations now use analytics in compensation planning, making data-driven decisions a core part of rewards strategy.
India's compensation landscape is steadily shifting from role-based to skills-based models, as nearly half (45-50 per cent) of surveyed organizations are adopting skill-based pay frameworks.
Further, emerging tech roles such as AI, generative AI, machine learning, and engineering can command up to 40 per cent skill-based premiums, the report added.
Meanwhile, organizations are strategically reshaping their long-term incentive plans (LTIPs) to better balance talent retention, performance alignment, and long-term wealth creation.
Around 30 per cent of companies now run two or more LTIPs in parallel, while ESOPs continue to be the most prevalent instrument, with adoption rising to approximately 78 per cent in 2025 from about 71 per cent in 2024.
With nearly 75 per cent of NSE 200 companies offering LTIs, these plans have become a standard component of CEO compensation, particularly within listed entities.
At the same time, GCCs and technology-led organizations are broadening LTIP eligibility beyond leadership teams to include individual contributors with critical and scarce skills.
The report further revealed that the median CEO compensation in Nifty 200 companies has reached Rs 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, emphasizing performance-linked compensation.
COOs and CFOs emerged as the highest-paid roles after CEOs, the report added.
Meanwhile, the report found that India's new Labour Codes are prompting organizations to reassess wage structures and statutory obligations.
Organizations are conducting cost modeling exercises, upgrading payroll systems, and preparing structured communication strategies to manage employee impact, it added.