Indian employees can expect a moderate but steady rise in pay packets in 2026, as companies recalibrate compensation strategies to balance cost pressures, talent retention and productivity in a rapidly evolving workplace, PTI reported citing a survey.Average salaries in India are projected to rise by 9 per cent in 2026, with organisations placing sharper emphasis on short-term incentives, performance-linked rewards and skills-based pay frameworks, according to Mercer’s Total Remuneration Survey 2026.The survey, which analysed compensation trends across more than 8,000 roles in over 1,500 companies, suggests that Indian employers are moving away from uniform annual increments towards more differentiated, outcome-driven reward structures.“Our survey shows most organisations in India will continue to plan pay increases in line with balancing cost pressures and talent retention,” said Malathi KS, Rewards Consulting Leader India at Mercer.“Alongside this, there is a growing emphasis on skills-based organisation architecture, talent assessments to better align workforce capabilities with evolving business needs and pay programmes to drive desired outcomes,” she added.The report highlights a renewed focus on short-term incentives such as bonuses, reflecting companies’ preference for linking compensation more closely with near-term performance, productivity and business priorities.As firms respond to digital transformation, AI adoption, and the rising scarcity of specialised skills, reward strategies are increasingly being redesigned to support agility, transparency and workforce resilience.“These shifts present Indian organisations with significant opportunities to strengthen workforce engagement and shape a more agile and inclusive workplace,” Malathi KS said.Mercer noted that the implementation of newly approved labour codes is also influencing compensation planning, with tighter social security coverage and preventive healthcare provisions shaping employer cost structures.To manage rising costs, some organisations are revisiting the proportion of employees eligible for increments, while simultaneously investing in skills development and targeted rewards for high performers.“This is a time for leaders to review their priorities and build stronger cultures embedded in a high-performance ethos,” said Mansee Singhal, Mercer’s Career Business Leader, India.“Making empowerment and accountability go hand in hand, and fostering a fit-for-purpose value proposition, will be critical,” she added.Sectors to watchHigh-Tech (product and consulting) and the automotive industry are expected to see the highest salary increases in 2026, at 9.3 per cent and 9.5 per cent, respectively.The IT, ITES and Global Capability Centres (GCCs) sector continues to lead in offering innovative benefits and progressive employee policies, reflecting its focus on well-being, engagement and future-ready talent.Mercer, a business of Marsh McLennan, is a global consulting firm that advises organisations on workforce strategy, rewards, health and retirement outcomes.
