Pay Increase Moderates Amid Cost Optimisation Efforts
Indian companies are expected to offer an average salary increment of 8.8% in 2025, slightly lower than the 9.0% projected for 2024, as they aim to optimise compensation budgets amid challenging global and domestic economic conditions, according to Deloitte India's latest report titled "Deloitte India Talent Outlook 2025."
The report highlighted that 75% of surveyed companies plan to either reduce or maintain their pay increase budgets compared to the previous year. While most sectors foresee stable or moderately lower increments, the consumer products sector is notably preparing for a significantly reduced budget for salary hikes.
Muted Revenue Growth Influences Compensation Strategies
Explaining the cautious approach towards salary increases, Deloitte India Partner Prakhar Tripathi noted, "In an environment where companies are witnessing muted revenue growth, compensation budgets are naturally coming under pressure. Controlled attrition and moderate inflation are helping companies optimise pay increases without adversely affecting talent outcomes. However, we expect the focus on performance and talent differentiation to remain core to the HR strategies, regardless of other considerations."
Performance-Based Differentiation Continues, Promotions Remain Steady
The report, based on insights from over 500 companies across seven sectors, also underscored ongoing efforts to retain top talent. High-performing employees in 2025 can anticipate increments approximately 1.7 times higher than average performers, although this differential is marginally lower compared to previous years.
Additionally, employees at junior management and individual contributor levels will likely receive increments 1.3 times higher than those at senior management positions. This trend indicates companies' continued emphasis on rewarding performance at operational and frontline management layers.
Promotions Expected to be Limited
While promotions are expected to remain steady overall, with around 12% of employees anticipated to be promoted in 2025, approximately one-third of participating companies indicated they would offer fewer promotions compared to last year. Additionally, promotion-linked pay increments are unlikely to see substantial increases.
Hiring Sentiment Positive Despite Moderate Attrition
Despite attrition moderating to 17.4% in 2024, organisations across sectors remain optimistic about their recruitment strategies. Nearly 80% of companies expressed plans to increase headcount in the upcoming financial year, showcasing continued confidence in India's long-term growth trajectory.
Structured Upskilling Initiatives Emerge but Challenges Persist
As companies increasingly shift towards structured, data-driven workforce upskilling approaches, the Deloitte report notes the growing adoption of common skills frameworks to address talent capability gaps. However, about 50% of organisations admitted lacking a regularly updated or structured competency framework, pointing towards a critical area for improvement.
This strategic pivot to a skill-oriented approach underscores the necessity for Indian companies to regularly update competency frameworks, ensuring a resilient and future-ready workforce.