Hitting the brakes: Pay hikes likely at 8.8% as companies tighten purse strings

Pay hikes across India Inc are likely to average 8.8% in the upcoming appraisal cycle, marginally down from 9% in 2024, found the Deloitte India Talent Outlook 2025 survey, as Indian companies focus on optimising compensation cost budgets while navigating global and local headwinds.

The survey shows that around 75% of companies will either reduce or keep their pay increases the same as last year. While most sectors will keep the increment growth stable or marginally lesser than the previous year, the consumer products sector expects a significantly lower increment budget.

The average Indian increment is expected to be the lowest in a decade, barring 2020-2021, the survey said.

Top performers can expect a 1.7x higher increment than average performers, as organisations focus on retaining key talent. Employees at individual contributor and junior management levels can expect a 1.3x higher increment than the top management level.

Overall percentage of employees receiving promotions is projected to remain steady at ~12%. A third of the participating companies are expected to grant fewer promotions than last year; most companies expect to not increase their promotion-linked pay increases compared with previous years.

As reported by ET, attrition in 2024 moderated to 17.4%. However, companies across sectors and sizes are still quite optimistic about hiring, the survey found, with almost 80% of companies planning to increase headcount in the coming financial year.

"In an environment where companies are witnessing muted revenue growth, compensation budgets are naturally coming under pressure. Controlled attrition and moderate inflation are helping companies optimise pay increases without adversely affecting talent outcomes. However, we expect the focus on performance and talent differentiation to remain core to the HR strategies, regardless of other considerations," said Prakhar Tripathi, partner, Deloitte India, in a statement.