India Inc. Forecasts 9.4% Salary Increase for 2025
India’s corporate sector is set to experience an average salary increase of 9.4% in 2025, according to the latest EY Future of Pay report. This marks a slight decline from the 9.6% increase observed in 2024. The report also reveals a decrease in employee attrition rates, which fell from 18.3% in 2023 to 17.5% in 2024. A significant trend highlighted in the report is the growing interest among employers in utilizing artificial intelligence (AI) to enhance employee compensation and rewards strategies.
AI’s Role in Compensation Strategies
The EY report indicates that nearly 60% of Indian employers are actively exploring AI’s potential to improve various aspects of employee compensation over the next three years. This includes salary benchmarking, real-time pay equity analysis, and customizable employee benefits. As businesses transition to more advanced systems, the report predicts a move away from traditional methods, such as manual pay benchmarking and fixed incentive models, towards AI-driven predictive analytics and real-time salary adjustments by 2028. The report emphasizes that AI-powered compensation platforms allow companies to personalize benefits, optimize reward structures, and ensure equitable pay across diverse workforce demographics. Additionally, blockchain technology and smart contracts are emerging as vital tools for secure and transparent payroll processing, particularly in cross-border compensation scenarios.
Sector-Specific Salary Trends
Certain sectors are expected to witness stronger salary growth in 2025. The e-commerce sector is projected to lead with a notable 10.5% salary increase, driven by the rapid expansion of digital commerce, increased consumer spending, and ongoing technological advancements. Similarly, the financial services sector is anticipated to see a robust 10.3% salary increment, fueled by the rising demand for specialists in fintech, digital banking, and cybersecurity.
Global Capability Centres (GCC) are also expected to experience salary increases of 10.2% in 2025, reflecting continued investments in digital transformation and automation. In contrast, the IT and IT-enabled services sectors are facing slower salary growth due to factors such as automation, cost optimization, and hiring slowdowns. The IT sector’s salary increases are expected to decline from 9.8% in 2024 to 9.6% in 2025, while IT-enabled services will see a modest increase from 9.2% to 9%.
Insights on CEO Compensation
The report provides valuable insights into CEO compensation trends, revealing that Nifty50 companies have experienced a significant 18-20% increase in executive pay from 2023 to 2024. Notably, promoter CEOs earn 30-40% more than their professional counterparts, with a growing trend towards internal promotions. In fact, 40-45% of CEO transitions over the past five years have been internal appointments. Moreover, 70% of CEO compensation is linked to performance, with incentives tied to business growth, environmental, social, and governance (ESG) goals, as well as long-term sustainability objectives. This trend underscores the increasing importance of aligning executive pay with broader corporate performance and accountability measures.
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