Salary growth in India seen at 9% in 2026 amid skills-based pay shift: Mercer
Indian companies are likely to raise salaries by an average of 9% in 2026, while increasingly relying on short-term incentives and skills-based compensation frameworks to balance cost pressures and talent retention, a Mercer report said.
Average employee salaries in India are set to increase by 9% in 2026, with a renewed focus on short-term incentives and skills-based systems, a report said on Wednesday.
According to Mercer's Total Remuneration Survey 2026, organisations in India are shifting toward broader, more holistic value propositions. The top factors influencing salary increases include individual performance, inflation, and the organisation's competitiveness in the job market, among others.
The survey, which covered remuneration trends across more than 8,000 roles and in more than 1,500 companies, revealed that organisations are continuing to refine their rewards packages, with a focus on short-term incentives, moving toward more transparent, skills acquisition and deployment-based systems.
"Our survey shows most organisations in India will continue to plan pay increases in line with balancing cost pressures and talent retention. Alongside this, there is a growing emphasis on skills-based organisation architecture, talent assessments to better align workforce capabilities with evolving business needs and pay programs to drive desired outcomes," said Malathi KS, Mercer’s Rewards Consulting Leader India.
As companies respond to shifting workforce dynamics -- ranging from digital transformation and sourcing scarce, in-demand skills to the rising importance of benefits and well-being -- they are redesigning rewards strategies to build a more resilient, future-ready talent.
This outlook broadly aligns with findings from an Aon survey released in October 2025, which projected a 9% salary increase in 2026, slightly higher than the 8.9% growth recorded in 2025, even amid global economic growth uncertainties.
"These shifts present Indian organisations with significant opportunities to strengthen workforce engagement and shape a more agile and inclusive workplace," Malathi KS said.
Short-term incentives like bonuses have led to a stronger emphasis on near-term performance alignment, cost efficiency, and the development of transparent, skills-based pay frameworks to support evolving workforce needs in the face of AI and productivity priorities.
The Aon survey in October 2025 also pointed to declining attrition, with overall employee turnover falling to 17.1% in 2025 from 17.7% in 2024, indicating a stabilising talent market that allows companies to focus more on targeted upskilling and performance-linked rewards.
Adding to this, the implementation of newly-approved labour codes will tighten the social security net and preventive health care, the report by the global consulting firm noted.
Sectorwise, High Tech (product and consulting) and the Automotive Industry are set to have the highest salary increases in 2026 at 9.3% and 9.5% respectively, while the IT, ITES, and Global Capability Centers (GCC) sector in India continued to lead the way in offering innovative and progressive employee benefits reflecting the sector’s commitment to enhancing employee well-being and engagement.
In a separate report published in March 2025, global capability centres in India were projected to see a sharper 9.8% rise in salaries over the following 12 months, driven by sustained demand for skills in artificial intelligence, machine learning, cloud computing and cybersecurity.
That report also noted that professionals with niche digital skills, including AI, ML and data science, were commanding salary premiums of 30–50% over traditional IT roles, underscoring the growing premium placed on specialised, high-impact capabilities.
"As India embraces digital transformation, navigates shifting workforce expectations and sharpens its focus on productivity, revisiting the number of employees eligible to receive an increment is a strategy being adopted by some companies to manage cost.
"This is a time for leaders to review their priorities and build stronger cultures embedded in a high-performance ethos, making empowerment and accountability go hand in hand, and fostering a fit for purpose value proposition", Mercer’s Career Business Leader, India, Mansee Singhal concluded.
Mercer, a business of Marsh McLennan, is a global leader in helping clients realise their investment objectives, shape the future of work and enhance health and retirement outcomes for their people.
Edited by Affirunisa Kankudti