India's corporate sector is poised for robust salary growth next year, with a projected average increase of 9% in 2026, according to a major new report. The findings from global HR consulting giant Mercer India highlight that the automotive and high-technology sectors, encompassing both product and consulting services, are expected to be at the forefront of this upward trend.
India Outpaces Global Economies in Compensation Growth
Malathi KS, Mercer’s Rewards Consulting Leader for India, emphasized that while salary increases in 2024 settled in the high single-digit range, reflecting a moderating economic climate, India continues to be a global standout. The nation's projected growth rate significantly outpaces the more modest 2% to 4% salary increases typically seen in developed economies like the United States, the United Kingdom, Europe, and Japan.
This projection is based on Mercer's comprehensive annual Total Remuneration Survey for 2026, which analyzed compensation trends across more than 8,000 different job roles within over 1,500 companies operating in India.
Shifting Reward Strategies and Sector-Specific Trends
The survey reveals that companies are actively refining their overall rewards packages. There is a clear strategic shift towards short-term incentives, such as performance bonuses, and a move to create more transparent, skills-based pay frameworks. This approach aims to better align employee compensation with near-term performance, cost efficiency, and the urgent need for specific skills in an era dominated by artificial intelligence (AI) and productivity goals.
Furthermore, the IT, IT-enabled services (ITES), and Global Capability Centers (GCC) sector in India maintains its reputation for innovation in employee benefits. These industries continue to lead in offering progressive packages, underscoring their commitment to boosting employee well-being and engagement.
Key Drivers of Salary Decisions Remain Constant
Despite potential economic headwinds, the core factors that will influence salary increments in 2026 are expected to remain consistent with previous years. Individual performance, an employee's position within their designated salary range, prevailing inflation rates, and an organization's need to remain competitive in the talent market will continue to be the primary drivers behind pay decisions.
The report confirms that even in a potentially tougher economic environment, these fundamental elements will guide how India Inc. structures its compensation and rewards its workforce in the coming year.
