The Indian workforce pay rise is expected to average 9% in 2026, according to Mercer’s Total Remuneration Survey 2026 released on Wednesday. The outlook reflects how employers are recalibrating pay strategies to balance cost pressures, talent retention, and changing skill requirements.
What the Indian workforce pay rise signals for 2026
Mercer’s study assessed remuneration trends across more than 8,000 roles in over 1,500 companies operating in India. The findings show a clear move away from uniform annual increments.
Instead, organisations are aligning pay more closely with performance outcomes, role relevance, and skill depth. As a result, the Indian workforce pay rise is becoming more differentiated across functions and seniority levels.
Key drivers influencing the Indian workforce pay rise
- Individual performance assessments
- Inflation-linked cost considerations
- Competitive pressure for scarce skills
Mercer noted that companies are refining pay frameworks to better reflect near-term business priorities.
How compensation strategies are evolving
The Indian workforce pay rise is increasingly supported by broader reward redesign. Short-term incentives such as bonuses are gaining prominence as firms seek stronger links between pay and delivery.
Organisations are also rolling out clearer, skills-based progression models. These frameworks aim to improve transparency and give employees clearer signals on how capabilities translate into compensation growth.
Mercer added that benefits and well-being initiatives now form a central part of total rewards. Employees are placing greater value on health coverage, work-life balance, and visible career pathways.
Sector trends shaping the Indian workforce pay rise
Salary growth expectations vary across industries. High Tech product and consulting firms are projected to see pay increases of around 9.3% in 2026. The automotive sector is expected to record increases closer to 9.5%.
IT, IT-enabled services, and Global Capability Centers continue to stand out for progressive benefits. These sectors use engagement and well-being programs to support retention in a competitive talent market.
Cost management and workforce restructuring
Mercer observed that some employers are reassessing the proportion of staff eligible for annual increments. This approach reflects tighter cost controls amid productivity targets and AI-driven transformation initiatives.
Policy context and leadership priorities
Upcoming labour code implementation is also shaping compensation planning. Mercer highlighted expanded social security coverage and stronger preventive healthcare provisions as factors influencing reward design.
Mercer leaders said organisations must focus on building performance-driven cultures. Empowerment and accountability, they noted, need to advance together to create a sustainable value proposition.
Mercer, a business of Marsh McLennan, advises organisations globally on work, rewards, health, and retirement outcomes.
