India Inc to See 9.4% Salary Hike in 2025, AI Set to Reshape Compensation Strategies: EY Report

New Delhi, February 27: India Inc is projected to witness an average salary hike of 9.4% in 2025, marking a slight decline from the 9.6% increase recorded in 2024, according to the EY Future of Pay report.

The report highlights a growing interest in AI adoption for compensation strategies, with nearly 60% of Indian employers exploring AI-driven solutions in salary benchmarking, real-time pay equity analysis, and personalized employee benefits over the next three years.

Key Insights from the Report:​

• Declining Attrition Rates: Employee attrition fell from 18.3% in 2023 to 17.5% in 2024.
• AI in Compensation: Companies are shifting from manual pay benchmarking and fixed incentives to AI-driven predictive analytics and real-time salary adjustments, expected to be fully realized by 2028.
• Blockchain for Payroll: Blockchain and smart contracts are emerging as secure and automated payroll processing tools, particularly in cross-border transactions.

Sector-Wise Salary Increments for 2025:​

1. E-commerce: The highest projected salary increase is 10.5%, fueled by digital commerce growth and rising consumer spending.
2. Financial Services: Expected hike of 10.3%, driven by demand for fintech experts, digital banking professionals, and cybersecurity specialists.
3. Global Capability Centres (GCCs): Projected rise to 10.2%, up from 10% in 2024, supported by investments in digital transformation and automation.
4. IT & IT-enabled Services (ITES): Experiencing a slowdown:
   • IT sector salaries to moderate to 9.6% (down from 9.8% in 2024).
   • ITES will decline to 9% (from 9.2% in 2024), reflecting a shift toward efficiency and leaner workforce structures.
5. Steady Trends: The automotive, pharmaceuticals, and manufacturing sectors continue to exhibit stable compensation growth.

Executive Compensation Trends:​

• CEO salaries in Nifty50 companies surged by 18-20% from 2023 to 2024, reflecting significant executive pay growth.
• Promoter CEOs earn 30-40% more than professional CEOs, with 40-45% of CEO transitions in the last five years happening through internal promotions.
• 70% of CEO compensation is performance-linked, incorporating business growth, ESG (Environmental, Social, and Governance) goals, and long-term sustainability.

The report underscores a transformative shift in India Inc’s compensation landscape, with AI and automation reshaping how salaries are structured, evaluated, and distributed across industries.