Pay hikes at India Inc likely higher this year; Average rise expected at 9.1% from 8.9% in 2025

Indian companies are likely to hand out higher average pay hikes of 9.1% in 2026 to their employees compared with 8.9% last year, according to a survey. Sectors like real estate/infrastructure and non-banking financial companies (NBFCs) are likely to offer the highest pay hikes of around 10%, according to findings from professional services firm Aon's Annual Salary Increase and Turnover Survey 2025-26 India.

The automotive and vehicle manufacturing, engineering design services, engineering and manufacturing, and retail industries are also projected to offer slightly higher-than-average salary hikes. The findings are based on data from more than 1,400 organisations across 45 industries.

According to the survey, attrition had slowed in 2025 to a five-year low of 16.2%. This reflects more targeted hiring practices and a greater emphasis on employee engagement, said Roopank Chaudhary, partner and rewards consulting leader, Talent Solutions for India, at Aon.

"Stronger salary growth in sectors such as real estate, NBFCs and manufacturing underscores employers' intent to invest in critical talent while building more sustainable compensation strategies," Chaudhary told ET.

The 2025 attrition rate of 16.2%, compared with 17.7% in 2024 and 18.7% in 2023, was closer to pre-Covid levels.

According to Aon, 43% of organisations are targeting double-digit revenue growth and 50% are budgeting salary increases above 9%.

"These companies are backing their growth ambitions with meaningful pay actions. The real objective now is to ensure these budgets are channelled towards critical roles and skills, rather than diluted through across-the-board increases," said Amit Otwani, associate partner, Talent Solutions for India at Aon.

Labour Code Impact

New Labour Codes are unlikely to have much impact on the pay hikes this year as most firms are still assessing the implications, according to Aon. "Companies have been impacted due to the implementation of wage codes as the wage cost has gone up... despite this, companies are projecting a 9.1% increment (on average) which reflects their bullish sentiments," said Chaudhary.

Under the new Labour Codes, which came into effect November 21, basic pay, DA and retention allowances must constitute at least 50% of the total remuneration, leading to changes in salary components like the PF and gratuity contributions for both employer and employee, according to experts.

According to Aon, 73% of organisations are still assessing how to fund the code impact, with only 27% having a defined approach (12% using increment budgets and 15% using a separate pool).

A majority of them are planning CTC restructuring, and among those, most are opting for a hybrid approach-increasing basic pay while adjusting allowances, according to Otwani.

About 15% of companies reported that their structures were already compliant with the codes, he said.