Indian companies are expected to roll out an average salary increase of about 9 per cent in 2026, even as they navigate a more challenging economic environment, according to Mercer India’s ‘Total Remuneration
Survey 2026’ released on Tuesday.
The survey, which tracks remuneration trends across more than 8,000 roles and over 1,500 companies, shows that while the overall salary hike outlook remains steady, employers are increasingly reworking how pay is structured, with a sharper focus on short-term incentives, skills-based systems and holistic employee value propositions.
Despite macroeconomic headwinds, the key drivers of salary increases in 2026 remain unchanged, Mercer said. These include individual performance, an employee’s position within the salary range, inflation trends and an organisation’s competitiveness in the talent market.
“Our survey shows most organizations in India will continue to plan pay increases in line with balancing cost pressures and talent retention,” said Malathi K S, Mercer’s Rewards Consulting Leader India. “Alongside this, there is a growing emphasis on skills-based organization architecture, talent assessments to better align workforce capabilities with evolving business needs and pay programs to drive desired outcomes.”
She added that as companies respond to digital transformation, scarcity of in-demand skills and the rising importance of benefits and well-being, rewards strategies are being redesigned to create a more resilient and future-ready workforce.
Greater focus on incentives and skills
The survey highlights a clear shift in how organisations are rewarding employees. Companies are increasingly refining their rewards packages with greater emphasis on short-term incentives, such as bonuses, and are moving toward more transparent, skills acquisition- and deployment-based pay systems.
According to Mercer, this reflects a strategic attempt to balance cost discipline with the need to attract and retain high-impact talent, particularly as artificial intelligence, productivity gains and workforce agility become central business priorities. The rollout of new labour codes, once fully implemented, is also expected to strengthen social security coverage and preventive healthcare, adding another layer to employee benefits.
Sectoral outlook
Among sectors, automotive and high-tech (product and consulting) are projected to see the highest salary increases in 2026, at 9.5 per cent and 9.3 per cent, respectively. Salary growth in SSO/GCC, life sciences, and consumer and retail is expected to remain largely flat.
Mercer noted that IT, IT-enabled services and Global Capability Centres (GCCs) continue to stand out for their innovative and progressive employee benefits, underlining the sector’s focus on employee well-being and engagement.
Managing costs amid change
“As India embraces digital transformation, navigates shifting workforce expectations and sharpens its focus on productivity, revisiting the number of employees eligible to receive an increment is a strategy being adopted by some companies to manage cost,” said Mansee Singhal, Mercer’s Career Business Leader, India.
She added that this is a time for leaders to review their priorities and build stronger cultures embedded in high performance ethos, making empowerment and accountability going hand in hand, and fostering a fit-for-purpose value proposition.
Overall, Mercer’s findings suggest that while headline salary growth in India is likely to remain stable in 2026, the structure of pay and rewards is undergoing a fundamental shift, with skills, performance and agility taking precedence over uniform increments.
