Global professional services giant EY ( formerly known as Ernst & Young), in its recent EY Future of Pay report, predicted that employee salaries in India are expected to increase by 9.1% as the country focuses on solid workforce planning and worker skilling, according to the official release.
“Compensation trends in India continue to reflect a phase of normalisation and prudent workforce planning with overall salary increments projected at 9.1% in 2026,” said EY in its recent report.
The company said that during its research, it focuses on the compensation and attrition trends across multiple sectors, which show how employers are paying their workers.
What are the top-performing sectors?
EY report suggests that sectors like financial services, e-commerce, and life sciences and pharmaceuticals are among the top-performing sectors, which are expected to record salary hikes in 2026.
“Engineering, Manufacturing, Automotive and Infrastructure sectors continue to moderate, with increments trending below prior years, reflecting cautious capex cycles, utilisation pressures and tighter margin discipline,” according to the report.
In India, the Global Capability Centers (GCCs) are set to fuel 10.4% of salary growth in the economy. The top-performing sectors, like financial services at nearly 10%, e-commerce at 9.9%, and life sciences and pharma at 9.7% are predicted to see an increase in salary this year.
Attrition rate in India Inc.
In the EY Future of Pay report, the company analysed that the attrition rate in the Indian workforce has dropped by 110 basis points to 16.4% as of the end of the year 2025, compared to the year-ago levels.
“Attrition trends indicate a gradual normalisation in the workforce market, as overall attrition declined to16.4% in 2025 from 17.5% in 2024,” said EY in its report.
The report also highlighted that more than 80% of voluntary exits in India remain voluntary, which suggests that people are looking to move for opportunity rather than company restructuring-related exits.
Sectors like financial services recorded the highest attrition rate of 24%, followed by the Hi-Tech and IT at 20.5% exits. The report also mentioned that the GCCs reported a lower attrition rate of 14.1%.
“The future of pay in India is no longer defined by the size of the annual increment alone. It is increasingly about precision – deciding which skills to invest in, which outcomes to reward, and how to balance competitiveness with sustainability,” said Abhishek Sen, partner and leader, total rewards, HR technology and learning, people consulting at EY India.
Sen also highlighted that employees working in India Inc. are now looking beyond the size of increment as they want clarity, fairness and consistency on how pay decisions are made in the market.
Can skills get you paid more?
The EY report also shed light on how the Indian workforce is now looking towards more skill-based roles, compared to earlier role-based jobs, with 45-50% of the surveyed organisations shifting to a skill-based pay framework.
People with skills in artificial intelligence (AI), generative AI, machine learning, and engineering have the potential to ask for up to 40% skill-based premiums in salary.
The jobs report EY also said that the gap between high and average performers widened, with the top company talent earning 120-150% of payouts, while average performing employees are receiving 60-80% payouts.