India Inc. is expected to roll out an average increment of 8.5-9.5% in the upcoming appraisal cycle, as companies calculate the impact of the new labour code and almost-stagnant inflation.
Like this year, 2026 is likely to remain an employer’s market, with outliers being those in the pharmaceutical and consumer industries, according to estimates from staffing and headhunting firms. While companies are doing better and costs have eased, margin pressure persists, they said.
The average increments have cooled after the hiring frenzy of 2021 and 2022. The hikes in those two years were around 9.7% and 10.6%, respectively, according to consulting firm Aon, excluding inflationary adjustments. The average increments in 2023 and 2024 were 9.7% and 9.3%, respectively.
“The multinationals (and a few Indian companies) will roll out hikes for 2026 over the coming quarter and we estimate it to be in the range of 8.5-9.5%,” said Anandorup Ghose, partner with Deloitte in Human Capital Consulting. “This year, the companies are looking more optimistic but since inflation has remained steady, there is less reason to push for higher increments. However, the wage code has brought in additional expenses and that will get factored into the hikes.”
Deloitte had estimated an average hike of 8.8% in 2025 and 9% in 2024 as companies navigated global and local headwinds.
Benign inflation, Diwali boost won't help
India’s retail inflation has cooled, averaging 1.8% in the April-November period. The Reserve Bank of India (RBI) projects inflation at just 2% for full fiscal year 2026 (FY26) compared with 4.6% recorded in FY25.
The increment cycle kicks in at the end of a fiscal year and in some cases towards the second half of the calendar year. Barring inflation and global events, consumption during the festive season, which spans from September to December, is also a significant factor, as it contributes a substantial portion of yearly sales.
India's total sales of goods and services during Diwali 2025 increased to more than ₹6 trillion as the central government's GST rate cut initiative boosted consumer sentiment in the domestic market, news agency PTI reported, citing data from the Confederation of All India Traders (Cait).
The projected hikes often fluctuate in response to market dynamics. For instance, Aon had projected an increment of 9.2% for 2025 earlier, but its recent study of more than 1,060 firms showed that the actual increase was 8.9% on average. That was the lowest hike in 15 years, barring the 6.1% increase in pandemic-hit 2020. However, real wage growth, adjusted for inflation, has shown improvement over the previous years. 2026 may not be better.
“Aon projects a salary increment of 9% in 2026 with non-banking financial companies, real estate and infrastructure, engineering design and life sciences expected to offer their employees a better hike than other sectors,” said Roopank Chaudhary, partner and rewards consulting leader at Aon.
For the recruitment industry, these estimates are important for negotiating with clients and candidates on expected compensation and for gauging how the job market will evolve.
Lohit Bhatia, chief executive officer (CEO)-designate at India’s largest staffing firm Quess Corp., estimates companies will offer an average increment of 9.8%, citing a reduction in benchmark rates by the central bank for his optimism. “The RBI reducing the repo rate is another indicator of more liquidity in the market, which in turn will help with the hikes,” Bhatia told Mint.
Early December, RBI's Monetary Policy Committee cut the repo rate by 25 basis points (bps) to 5.25%, citing a “rare goldilocks period” where growth remains robust and inflation benign, surprising a section of the market that was expecting a pause. For the quarter ended September, the Indian economy posted a surprising six-quarter high growth rate of 8.2%, significantly above the RBI’s 7% projection.
Labour code increases costs
Another factor this year is the new labour codes, which will affect calculations of statutory deductions and take-home salary.
“Although Diwali was better than expected, salary hikes are expected to be in similar ranges as in 2025. Companies are dealing with the implementation of labour codes along with trying to manage costs,” said Neeti Sharma, CEO of TeamLease Digital, part of the staffing firm TeamLease group. “Overall, hikes are expected to be around 9%, similar to 2025, while employees at the minimum wage level may see higher increases of 14 to 15%.”
The new labour codes may result in higher social security contributions for both employers and employees. For the employee, taxable salary and contribution to superannuation will rise, reducing the take-home pay. For the company, there will be a potential impact on profit and loss, as liabilities for leave and gratuity may increase. The new code states that employers must provide free annual health checks to all workers aged 40 and above, which may also increase costs.
Unlike the permanent employees, those placed through staffing firms are temporary workers on the payrolls of a vendor employed with clients for six months to two years. The clients communicate the quantum of hikes, and the staffing firm implements them for employees.
The senior management may not have much to rejoice either in the coming appraisal cycle.
“The mid-senior execs in the IT/ITES sector can expect 6-8% hikes, similar to last year. The pharma, consumer, consulting industry is pegged to get 8-10%,” said Pranshu Upadhyay, regional director for talent search firm Michael Page. “The hikes should have been more as funding in startups has improved, global tensions seem to have eased, but India Inc continues to face margin pressure, which in turn will impact the hikes remaining flat as last year.”