Mercer India’s 2026 Total Remuneration Survey projects that average employee salaries in India will rise by a median 9% next year, in line with 2025 trends even as companies face a more challenging macro environment. The survey, which covers over 8,000 roles across more than 1,500 organisations, finds that salary decisions continue to be driven by familiar levers: individual performance, an employee’s position in the pay range, inflation and the need to stay competitive in the job market.
Rather than cutting back on increases, many organisations are reshaping how they pay—using targeted increments and differentiated budgets to protect critical skills while maintaining overall cost discipline. This points to confidence in long-term growth, with sharper focus on productivity and return on talent spend.
Short-Term Incentives and Skills-Based Pay Take Centre Stage
A key finding is a clear pivot toward short-term incentives and skills-driven pay structures. Organisations are refining rewards packages to place greater weight on bonuses and performance-linked payouts, aligning compensation more tightly to near-term business results, cost efficiency and productivity metrics.
At the same time, employers are moving toward more transparent systems based on skills acquisition and deployment, shifting from pure role/tenure-based models to frameworks that reward in-demand capabilities and how effectively they are applied. Mercer notes a growing emphasis on skills-based organisation architecture and formal talent assessments to better match workforce capabilities with evolving business needs, especially as AI and digital transformation reshape roles.
Sector Outlook: Auto, High Tech and GCCs Lead
Sector-wise, High Tech (product and consulting) and Automotive are expected to see the highest salary growth in 2026, at around 9.3% and 9.5% respectively, reflecting intense competition for specialised engineering and digital talent. Manufacturing and engineering are also projected to stay near the upper end of the range, while sectors such as life sciences, consumer and retail are likely to remain closer to the 9% median.
Global Capability Centers (GCCs), IT and ITES continue to lead in progressive benefits and employee experience, even where headline increases are flat. Many employers are also revisiting how many employees receive increments at all, using eligibility as a cost lever while concentrating rewards on high-impact, high-scarcity skills.
From Pay Hikes to Holistic Value Propositions
Beyond base pay and bonuses, the survey shows Indian employers pivoting toward broader, more holistic employee value propositions. These include sharper focus on benefits, well-being, flexibility and career development, which are becoming central to how organisations differentiate themselves in a tight, skills-constrained market. Newly approved labour codes are expected to strengthen social security and preventive healthcare coverage, further shifting expectations on the benefits baseline.
Mercer’s leaders note that most organisations are trying to balance cost pressures with talent retention, using skills-based structures and targeted pay programmes to drive desired outcomes rather than broad-brush increments. As India leans into digital transformation and productivity, this is the moment for leaders to hardwire high-performance cultures where empowerment, accountability and a fit-for-purpose value proposition move in lockstep.
