Appraisal Season 2026: Insights into Salary Hikes and Fastest Rising Pay in India Inc

With the appraisal season approaching, discussions surrounding salary increases, promotions, and performance rewards are gaining momentum in workplaces across India. A recent report indicates that companies are poised to implement an average salary hike of 9.1% in 2026, reflecting a transition towards skills-based pay structures rather than traditional uniform increments. The EY Future of Pay report highlights that businesses are increasingly redesigning their compensation strategies to focus on specialized skills, productivity outcomes, and long-term employee retention.

Projected Salary Increases Across Sectors

The EY report reveals that Global Capability Centres (GCCs) are expected to lead the way in salary growth, with anticipated increments of 10.4%. This surge is attributed to the ongoing global demand for specialized digital skills. Following closely, financial services firms are projected to offer salary hikes of around 10%, while e-commerce companies may see increases of 9.9%. The life sciences and pharmaceuticals sector is also expected to experience a 9.7% rise in salaries. These findings are based on data collected from 178 companies across 16 different sectors in India, indicating a broad trend towards enhanced compensation in response to evolving market demands.

Stabilization of Attrition Rates

The report also notes a stabilization in attrition rates, which have decreased to 16.4% in 2025 from 17.5% in 2024. More than 80% of employee exits are voluntary, suggesting that job changes are primarily driven by opportunities rather than organizational restructuring. Financial services recorded the highest attrition rate at 24%, particularly in sales, relationship management, and digital roles. Professional services followed with an attrition rate of 21.3%, while the Hi-Tech and IT sectors reported 20.5%. In contrast, GCCs exhibited a lower attrition rate of 14.1%, indicating a growing stability within that segment. Abhishek Sen, EY India Partner and Leader, emphasized that organizations are rethinking their investment strategies in talent, focusing on precision in skill development and reward systems.

Shift Towards Skills-Based Compensation

As the adoption of artificial intelligence accelerates, companies are aligning their compensation models with measurable business impacts and specialized expertise. The report indicates that 50-60% of large organizations now utilize analytics in their compensation planning, making data-driven decisions central to their reward strategies. Approximately 45-50% of surveyed companies are transitioning towards skill-based pay frameworks, marking a significant shift in India’s compensation landscape. Emerging technology roles, particularly in AI and machine learning, can command skill premiums of up to 40%. Additionally, about 30% of firms are implementing multiple long-term incentive plans (LTIPs) to enhance retention and align compensation with performance metrics.

Impact of New Labour Codes on Compensation Structures

The study also highlights that India’s new Labour Codes are prompting organizations to reevaluate their wage structures and upgrade payroll systems. This reassessment is crucial for compliance with upcoming regulatory changes. The report notes that nearly 75% of NSE 200 companies now offer long-term incentives, which have become a standard component of CEO compensation, especially in publicly listed firms. In 2025, the median CEO pay in Nifty 200 companies reached between Rs 7-9 crore, reflecting a year-on-year increase of 12-15%. The compensation structure typically comprises 25-30% fixed pay, another 25-30% from short-term incentives, and 45-50% linked to long-term incentives. The report also identifies COOs and CFOs as the next highest-paid leadership roles, underscoring the evolving landscape of executive compensation in India.

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