India Inc's pay hikes at a 15-year low, 2026 not seen much better

“The increments that we had projected were early on in the year, around February-March. That was before the impact of tariffs and volatile uncertainty... We were expecting the number to be a little lower than what they projected. But that it has fallen below 9% is remarkable. I think 0.1-0.2% fall is usually the case when there is a little bit of change in the uncertainty. It has fallen by 0.3% means that during March-May, when most (companies) give increments, there was a lot of caution, plateauing down of expectations and rationalizing budgets," Roopank Chaudhary, partner and rewards consulting leader at Aon, told Mint.

Aon had projected an average increment of 9.2% for 2025, but a study of more than 1,060 firms in ‘Salary Increase and Turnover Survey 2025-26, India’ showed that the actual hike rolled out was 8.9%. This is the lowest hike in 15 years, barring 2020 when the pandemic hit, a lockdown was announced and companies were grappling with new strategies to keep their businesses alive. The increment offered then was about 6.1%. But now, the hiring tide is low due to the clampdown of spending budgets following the levy of punitive tariffs on Indian exports by the US, prolonged global wars and a volatile economy across borders.

The real wage growth, calculated by subtracting the inflation rate from the salary increase, reflects a smaller additional income in the pockets of the employees. Going by Aon’s data, while the salary hike was 8.9% in 2025, the real wage growth—which shows how much more you can actually buy with your pay—turns out to be 4.7% after the adjustment for inflation.

After a muted year for employees, the signals for 2026 are also not much better. Though it is early days yet, Aon's report projects an average salary increment of 9% next year, with non-banking financial companies, real estate and infrastructure, financial institutions expected to offer their employees a better hike than other sectors.

Senior headhunters have also noted the drastic drop in negotiation powers of candidates and some sectors are hit more than others. “The consulting sector is seeing more 'pay for performance' and is increasingly differentiating partners who have a strong personal standing in the market. Compensation hike at the partner-level in switching firms is typically around 20%, down from about 40% during post covid hey days," said Puneet Kalra, managing director for executive search firm Russell Reynolds Associates. Kalra also advises on boards and chief executive officers (CEOs) for the search firm.

In fact, with nearly 10 months of the year over, Aon’s data shows that even when it comes to involuntary attrition, or retrenchment, a 4.6% level is the highest after the 5.1% of 2020, the pandemic year. With the country's overall voluntary attrition numbers on a steady decline over the last five years, it is clear that employees are preferring to stay put than jump ship. Mint had written in June about the hesitancy in the job market as candidates were afraid that the last man in will be the first man out.

This is quite the opposite of the trend seen only a couple of years ago. The job market yo-yo was on the candidate's side for a couple of years in 2022 and 2023. During this period, firms guzzled talent as their businesses digitized and workplaces opened up after the pandemic. Moonlighting and multiple job offers was the accepted norm, as employees switched jobs at their asking price.

Another executive search firm Korn Ferry pointed out that over the past one year, the risk factor weaved into compensation has increased. “While one can still get a 20-30% increment, but in their compensation barely 60% is fixed. About 40% is based on performance and stock, and more companies have changed into this compensation structure," said Navnit Singh, chairman and regional managing director at Korn Ferry, India.

While those in the junior levels may still manage to wrangle in a better hike of around 30%, the middle and senior segments may not be that fortunate. And it's not just about their pay hikes; even their roles may get split. “The median salary hike is 17-22% now, while chief experience officers (CXOs) in pharmaceuticals, manufacturing, tech can still get a 20-25% hike during a job change," said Pranshu Upadhyay, regional director for talent search firm Michael Page. “Also, there is an interesting shift in tech leadership. Earlier, there was one CTO (chief technology officer) who was in charge of tech. Now, there are two posts—that of a CTO and a chief AI officer that constitutes an organization's tech leadership."