Corporate India Salaries Projected to Rise by 9.1% in 2026: EY Future of Pay Report
New Delhi, February 23, 2026: India's corporate sector is set for a stable salary growth phase in 2026, with the average increment projected at 9.1%, according to the EY Future of Pay 2026 report released today by Ernst & Young (EY) India. This represents a slight moderation from the 9.3% recorded in 2025, reflecting normalisation in compensation budgets after years of post-pandemic recalibration and cost discipline.
The report, drawing from extensive industry surveys on compensation trends, attrition, and pay structures, highlights a clear shift toward skills-based and performance-linked rewards. Companies are moving away from uniform hikes, instead prioritizing variable pay, sharper differentiation for top performers, and premiums for in-demand skills—especially in AI, digital technologies, and specialized roles. Variable pay as a percentage of fixed salary rose to 16.1% in 2025 (up from 14.8% the previous year), and this trend is expected to continue.
Sectoral Leaders in Salary Growth
- Global Capability Centres (GCCs): Projected to lead with 10.4% increments, driven by strong global demand for digital, engineering, and specialized capabilities.
- Financial Services: Around 10%.
- E-commerce: 9.9%.
- Life Sciences and Pharmaceuticals: 9.7%.
Other sectors, including engineering, manufacturing, automotive, and infrastructure, are seeing more moderate increases due to margin pressures and cautious capital allocation. Attrition has eased to around 16.4% in 2025, though voluntary exits for better opportunities remain a key concern.
PSU and Government Sector: DA Adjustments and Pay Revision Expectations For employees in Public Sector Undertakings (PSUs) and central government services, the focus remains on Dearness Allowance (DA) revisions to counter inflation. Recent calculations based on All India Consumer Price Index for Industrial Workers (AICPI-IW) data indicate that DA is expected to reach 60% effective from January 1, 2026—a roughly 2% increase from the previous level (with formal Cabinet approval typically in March). This follows patterns from prior quarters and applies to millions of PSU and government staff.
Broader wage revisions are under discussion, particularly in profit-making PSUs in sectors like oil & gas, coal, banking, and power. Strong financial performance in companies such as ONGC, Coal India, and SBI could support higher Performance-Related Pay (PRP) for executives.
The 8th Pay Commission, constituted in late 2025 with Justice Ranjana Prakash Desai (Retd.) as Chairperson, is actively working on recommendations (report expected around May 2027). While widely speculated to take effect from January 1, 2026 (with potential arrears), no final fitment factor, pay matrix, or structure has been announced yet. Unions and employees anticipate meaningful hikes, but implementation depends on government acceptance.
Looking Ahead As India's economy stabilizes, compensation strategies emphasize rewarding specialized talent and high performance over blanket increases. For private sector employees, 2026 appraisals are likely to reward skills and contributions significantly. In the PSU space, DA hikes provide immediate relief, while the 8th Pay Commission holds promise for long-term structural changes.
The full EY Future of Pay 2026 report is available on the EY India website for in-depth analysis. This reflects the most current industry consensus as of February 23, 2026.