Salary growth may ease to 9.1% in 2026; GCCs, pharma may be outliers

India Inc's salary growth is projected to ease to 9.1% in 2026, with GCCs and pharma firms leading increases as companies prioritise skill-based rewards, variable pay and talent retention strategies

Salary hikes by India Inc in 2026 are expected to be marginally lower than in 2025, with paycheques likely to grow 9.1 per cent during the current year compared to 9.3 per cent in the preceding year, according to EY’s Future of Pay 2026 report published on Monday.

 

However, Global Capacity Centres (GCCs) and pharma companies will be the outliers. While GCCs are expected to lead salary growth, reaching 10.4 per cent in 2026 compared to 10.2 per cent in 2025, pharma companies will hand out salary hikes of 9.7 per cent, up from 9.6 per cent during the same period.

   

Manufacturing leads the sectors that will see a moderation in salary growth at 9 per cent for 2026 compared to 9 per cent in 2025. Among other sectors that are expected to see their salary growth slip below last year’s level are e-commerce (9.9 per cent), professional services (9.4 per cent) and information technology (9.2 per cent).

 

“The 2026 outlook signals stabilisation rather than acceleration, with organisations maintaining prudent salary budgets and prioritising targeted, skill-based differentiation over broad-based increases,” said the report.

 

The report also noted a shift from role-based rewards to capability-based rewards. Among performance-linked payout structures, variable pay plans (non-sales) remained the most popular incentive mechanism.

 

Average variable pay for employees as a share of fixed pay increased to 16.1 per cent in 2025, up from 14.8 per cent in 2024. This signals a deliberate shift towards higher at-risk pay, the report said.

 

“Payout dispersion widened in 2025, with top performers earning 120 to 150 per cent of the target, while average performers received 60 to 80 per cent,” said the report.

 

Additionally, overall attrition has declined to 16.4 per cent in 2025 from 17.5 per cent in 2024, with falling risk appetites of employees, the report said. However, voluntary attrition accounted for 80 per cent of employee exits, with the financial services sector being the highest-attrition sector, followed by professional services and information technology (IT).

 

The top five roles with the highest attrition were data science and business intelligence, IT development, customer support, engineering and sales.