Firms plan 9.1 pc pay hike in 2026 amid skills-focused shift, says report

India Inc is expected to roll out an average salary hike of 9.1 per cent in 2026, as companies move towards sharper, skills-led compensation strategies amid evolving business priorities, according to a report released on Monday. Overall salary increments projected at 9.1 per cent in 2026, according to the fourth edition of EY Future of Pay report. Global Capability Centres (GCCs) are set to lead salary growth in 2026 with projected increments of 10.4 per cent, reflecting sustained global demand and investment in specialised digital capabilities. Financial services follow closely at around 10 per cent, with e-commerce at 9.9 per cent and lifesciences and pharmaceuticals at 9.7 per cent, rounding out the top-performing sectors. This report is based on inputs from 16 sectors across India, spanning 178 companies. Meanwhile, the report revealed that the attrition is moving towards a gradual stabilisation, as it 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 talent movement continues to be opportunity-driven rather than restructuring-led. Financial services recorded the highest attrition at 24 per cent, particularly across 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 organisations think about investing in their people. 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,'' EY India Partner and Leader, Total Rewards, HR Technology and Learning, People Consulting, Abhishek Sen said. 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 organisations 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 organisations are shifting to 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 premium, added the report. Meanwhile, organisations 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 LTI plans 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 organisations are broadening LTI eligibility beyond leadership teams to include individual contributors with critical and scarce skills. The report further revealed that 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, emphasising performance-linked compensation. COOs and CFOs emerged as the highest-paid roles after CEOs, added the report. Meanwhile, the report found that India's new Labour Codes are prompting organisations to reassess wage structures and statutory obligations. Organisations are conducting cost modeling exercises, upgrading payroll systems, and preparing structured communication strategies to manage employee impact, it added.