MUMBAI: India Inc is willing to pay to retain its best talent—but the terms are changing.
As companies head into an appraisal cycle expected to deliver average salary hikes of 8.5-9.5%, employers are refining how they hold on to their top performers. Counter-offers and sweeteners remain part of the retention toolkit, but they are now accompanied by tighter conditions such as longer lock-ins and clawback clauses.
The recalibration comes as the job market cools. Employers across sectors have become more cost conscious, even as they continue to prioritise retention of top performers. Counter-offers are increasingly being structured around lock-ins, clawbacks and deferred payouts, alongside salary hikes.
The changing balance of power is visible in attrition data. According to a Mercer study, voluntary attrition across India Inc stood at 13.1% in 2023 and fell to 11.7% in 2024. In the first half of 2025, it dropped sharply to 6.4%. With fewer employees switching jobs, companies have more room to revisit retention terms while keeping costs in check.
Mint explains what is changing—and why it matters for top performers.
How muted are the hikes?
2026 is expected to remain an employer’s market, with outliers largely limited to the pharmaceutical and consumer sectors. Industry and HR heads have projected 8.5-9.5% average increment. This reflects a cooling after the hiring boom of 2021 and 2022, when salary hikes averaged 9.7% and 10.6%, respectively, according to consulting firm Aon, excluding inflationary adjustments. In 2023 and 2024, average increments moderated to 9.7% and 9.3%.
Within organizations, differentiation has also become sharper. While a high performer typically receives about 1.7 times the firm’s average increment, this year employees in artificial intelligence (AI) and data architecture-led roles are expected to see a wider gap, with hikes exceeding twice the average.
At the same time, companies have made their performance evaluation frameworks more stringent. Over the last few years, firms using bell-curve metrics have made the curve steeper, clustering a larger share of employees in the middle category while slotting high and low performers more narrowly at either end. The structure allows companies to reward exceptional talent selectively without raising compensation across the board.
Lock-ins and clawbacks move beyond the corner office
As salary growth moderates, retention strategies are shifting from outright cash counters to contract-based controls.
“About two years ago, we saw a 100% counter offer/retention given to the high performer but now the employer may match the offer from another firm with two-year lock-ins and clawback options. Due consideration is also given to peers at the level before taking any decision,” said Upasana Agarwal, partner, professional and financial services, ABC Consultants.
She noted that companies have become more cost conscious and that a direct counter-offer in a weak job market does not work.
Clawbacks, once largely limited to CXOs to address irregularities or abrupt exits, are now being used more broadly. This year, several high-paying campus recruiters built clawback clauses directly into offer letters.
Mint reported in December that while hiring from the Indian Institutes of Technology (IITs), TVS Motor Ltd’s ₹300,000 joining bonus comes with a three-year clawback. IDFC Bank Ltd, Siemens Energy, and EXL also stitched clawbacks into their offers. A clawback requires employees to forfeit a portion of their compensation if they leave before a stipulated period.
Equity, incentives and deferred rewards
Listed companies are also leaning more heavily on stock-linked compensation to retain talent without committing to immediate payouts.
According to a senior partner at one of the top three consulting firms advising companies on compensation, boards are increasingly open to performance-linked equity. “Although proxy advisory companies are not very keen on performance based units, some of our listed clients are chalking them out. The boards are keen to implement this program to high performers for both middle and senior management,” the partner said, requesting anonymity.
Under performance share units, or PSUs, employees receive shares only when the company meets specific milestones. Restricted stock units (RSUs) involve a fixed number of shares that vest over time or after defined targets are achieved. During IIT placements, Texas Instruments offered RSUs with a four-year vesting period. Consulting firm Mercer noted in a December study that companies are placing greater emphasis on short-term incentives such as bonuses to align near-term performance with cost efficiency.
Alongside equity-linked rewards, companies are investing more in coaching programmes. Middle and senior managers are increasingly being offered professional coaches to support career development and leadership progression, positioning growth opportunities as part of the retention proposition rather than relying solely on pay.
Retention without higher pay
Large business groups are also exploring internal mobility as a way to retain senior talent. One of India’s biggest business houses is working with consultants to allow more senior managers to move across different companies within the group.
“Employee costs are a serious concern today and companies do not want to offer just money. Instead, they are rolling out career-growth opportunities where you can work with another company housed in the same group. It plugs the need to look out,” said a senior executive aware of the changes.
Cost pressures underpin these choices. A Mint analysis shows that employee costs at Nifty 500 firms were 15% of net sales in the September quarter of 2025, compared with 15.4% in the same period a year earlier. Although employee costs dipped to 14.4% in the March quarter, they rose again in subsequent months, reinforcing management focus on retention strategies that limit long-term expense growth rather than raise fixed pay.