With appraisal season approaching, conversations about pay raises, promotions and performance awards are returning to office corridors as companies reevaluate compensation strategies.According to a report, companies are preparing to increase salaries by an average of 9.1 percent in 2026, indicating a shift towards skill-based pay structures rather than uniform annual salary increases.
The fourth edition of the EY Future of Pay report notes that compensation strategies are increasingly being redesigned based on specific capabilities, productivity outcomes and long-term retention priorities as businesses realign workforce investments.Global Competence Centers (GCCs) are expected to see a salary increase with a projected salary increase of 10.4 per cent, reflecting the continued global demand for specialized digital skills. The report said financial services companies are likely to see growth of about 10 percent, while e-commerce companies may see 9.9 percent growth and life sciences and pharmaceuticals may see 9.7 percent growth.The findings are based on inputs from 178 companies across 16 regions of India.
As hiring pressure eases, job losses stabilize
The report indicated that attrition levels are gradually stabilising, falling from 17.5 per cent in 2024 to 16.4 per cent in 2025, with more than 80 per cent of exits remaining voluntary, suggesting that job changes continue to be opportunity-driven rather than restructuring.Financial services saw the biggest decline of 24 percent, particularly in sales, relationship management and digital roles. Business services stood at 21.3 percent, while high-tech and IT stood at 20.5 percent. The GCC reported a relatively small decline of 14.1 percent, underscoring increasing workforce stability in the region.“We are at a turning point in how organizations think about investing in their people. The future of pay in India is no longer defined just by the size of annual salary increases. 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, Partner and Leader, Total Rewards, HR Technology & Learning, People Consulting, EY India.He added that with sharper differentiation supported by data-driven decision-making, reward strategies are becoming more thoughtful.“At the same time, employees are looking beyond the size of pay increases; they want clarity, fairness and consistency in making pay decisions,” Sen said.
Skills, AI roles pay a premium
As artificial intelligence adoption accelerates, compensation models are increasingly tied to measurable business impact and specialized expertise. 50-60 percent of large organizations now use analytics in compensation planning, making data-based pay decisions central to reward strategy.Around 45-50 per cent of the organizations surveyed are moving towards skill-based pay structures, reflecting a structural change in India’s compensation landscape.The report said emerging technology roles – including AI, generative AI, machine learning and engineering – could have up to a 40 per cent skills premium.Companies are also reshaping long-term incentive plans (LTIPs) to strengthen retention and align compensation with performance. About 30 per cent of companies now run two or more LTI plans simultaneously, while the ESOP adoption rate increased to about 78 per cent in 2025 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, especially in listed companies.The average CEO salary across Nifty 200 companies to reach Rs 7-9 crore in 2025, showing a growth of 12-15 per cent year-on-year. On average, 25-30 percent of CEO compensation is fixed salary, another 25-30 percent comes from short-term incentives, while 45-50 percent is tied to long-term incentives.COOs and CFOs have emerged as the next highest-paid leadership roles, the report said.The study also said India’s new labor codes are prompting organizations to reevaluate pay structures, upgrade payroll systems and conduct cost modeling exercises to prepare for compliance changes.
