India’s salary increments are projected to moderate to 9.1% in 2026, down from 9.3% in 2025. Global Capability Centers (GCCs) are set to lead growth with 10.4% hikes, while companies increasingly adopt performance-based rewards.
India’s corporate landscape is reported to moderate with overall salary increments projected at 9.1 per cent in 2026. This follows a marginal softening from the 9.3 per cent recorded in 2025, according to the EY Future of Pay report.
Sector-Specific Salary Projections
Global Capability Centers (GCCs) are set to lead salary growth in 2026 with projected increments of 10.4 per cent, reflecting sustained global demand and investment in specialised digital capabilities. Financial Services follows closely at around 10 per cent, with E-commerce at 9.9 per cent and Lifesciences and Pharmaceuticals at 9.7 per cent, rounding out the high-growth sectors.
The report highlights that GCC salary increments remain “structurally elevated, supported by sustained global demand and skill scarcity, positioning GCCs as the strongest salary growth segment,” in the country.
Moderation in Traditional Sectors
“Engineering, Manufacturing, Automotive and Infrastructure sectors continue to moderate, with increments trending below prior years, reflecting cautious capex cycles, utilisation pressures and tighter margin discipline,” the report noted.
Shift Towards Differentiated Compensation
Organisations are increasingly shifting away from “one-rate” adjustments. In 2026, employers are holding salary budgets steady while “sharpening differentiation by deploying targeted pay corrections, skill premiums and performance-led rewards.” AI and digital roles continue to pull ahead, pushing firms to refresh job architecture.
Widening Gap in Performance-Based Rewards
According to the report, the gap in rewards is becoming more pronounced, with an “outstanding performer” receiving 1.5 to 1.6 times the increment of those who simply meet expectations.
Increased Focus on Variable Pay
Variable pay is also becoming a more significant component of the total compensation package. Average variable payout as a percentage of total fixed pay increased to 16.1 per cent in 2025, up from 14.8 per cent in 2024. The report data shows a “deliberate shift toward higher at-risk pay” across levels. For instance, variable pay for Executives (CXOs) reached 27.5 per cent in 2025, while Individual Contributors saw an average of 11 per cent. “Payout dispersion widened in 2025, with top performers earning 120% to 150% of the target, while average performers received 60% to 80%, sharpening pay-for-performance outcomes,” the report said.
Emerging Trends: ESG in Compensation
Additionally, new metrics are entering the compensation framework, with 35 per cent of large organisations incorporating “ESG-linked KPIs in leadership variable pay.”
Key Challenges and Strategic Responses
The top challenges facing rewards management include attracting and retaining talent in a competitive market and managing workforce redesign due to AI and automation. To address these, firms are using “pulse surveys and analytics to guide targeted reward investments” and ensure a “strong link between performance, impact and pay outcomes.” (ANI)
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