Employees across corporate India should brace for another year of modest salary growth, with the upcoming appraisal cycle for 2026 expected to deliver average increments in the range of 8.5% to 9.5%. This projection indicates a continuation of the trend seen in 2025, signalling a period of stabilization after the post-pandemic hiring boom.
A Cooling Trend in Salary Growth
The anticipated increments for 2026 reflect a clear cooling from the hiring frenzy witnessed in 2021 and 2022. According to data from consulting firm Aon, average salary hikes during those peak years were around 9.7% and 10.6% respectively, excluding inflationary adjustments. The years 2023 and 2024 saw increments of 9.7% and 9.3%. The projected 2026 range suggests companies are balancing improved performance with persistent margin pressures and new regulatory costs.
Anandorup Ghose, a partner at Deloitte in Human Capital Consulting, notes that while companies are more optimistic, steady inflation provides little impetus for higher raises. "We estimate it to be in the range of 8.5-9.5%," he said, highlighting that the new wage code has introduced additional expenses that will factor into the final calculations. Deloitte had previously estimated average hikes of 9% in 2024 and 8.8% in 2025.
Key Factors Influencing the 2026 Appraisal Cycle
Several macroeconomic and regulatory elements are converging to shape the upcoming increment cycle. Firstly, benign inflation has removed a traditional driver for higher wage adjustments. India's retail inflation averaged a low 1.8% from April to November 2025, with the Reserve Bank of India projecting it at just 2% for the full fiscal year 2026 (FY26).
Secondly, the implementation of the new labour codes is a significant variable. Neeti Sharma, CEO of TeamLease Digital, explains that companies are grappling with these codes while managing costs. The codes may lead to higher social security contributions for both employers and employees, potentially reducing take-home pay and increasing company liabilities for leave and gratuity. Sharma estimates overall hikes around 9%, similar to 2025, with minimum wage workers possibly seeing higher increases of 14-15%.
Despite a robust GDP growth of 8.2% in the quarter ending September and a festive Diwali season that saw sales cross ₹6 trillion, these positive indicators are not translating into substantially larger pay packets. Roopank Chaudhary, partner at Aon, projects a salary increment of 9% for 2026, with sectors like NBFCs, real estate, infrastructure, engineering design, and life sciences likely to offer better-than-average hikes.
Sectoral Variations and Management Outlook
The appraisal landscape will not be uniform across all industries or job levels. The pharmaceutical and consumer sectors are expected to be outliers, potentially offering better increments. Conversely, the IT/ITES sector may see more restrained growth for its senior management.
Pranshu Upadhyay, regional director at Michael Page, indicates that mid-senior executives in IT/ITES can expect hikes of 6-8%, similar to last year. The pharma, consumer, and consulting industries are pegged for 8-10%. Upadhyay points out that while conditions like improved startup funding and eased global tensions could have supported higher raises, persistent margin pressure across India Inc. is keeping increments flat.
The perspective from staffing firms, which manage temporary workers, is also cautious. Clients communicate hike quanta to these firms, who then implement them. Lohit Bhatia, CEO-designate at Quess Corp., offers a slightly more optimistic estimate of 9.8%, citing the RBI's recent repo rate cut to 5.25% as an indicator of increased market liquidity that could aid salary revisions.
In conclusion, the 2026 appraisal cycle is shaping up to be an employer's market, characterized by cautious optimism and calculated increments. Employees will see growth that largely mirrors 2025, as organizations navigate a complex mix of steady growth, low inflation, and the added financial implications of the new labour codes.
