Preparing for 9% Hikes
Introduction
I spent the morning reading the latest compensation outlook and felt compelled to put down what this means for employees, employers and the broader talent market. According to a Times of India summary of Mercer’s Total Remuneration Survey 2026, India Inc is likely to deliver an average salary increase of about 9% in 2026 India Inc may witness 9% salary rise in 2026: Report. The survey covered remuneration data across more than 8,000 roles and over 1,500 companies, and it signals both continuity and change in how organisations are thinking about pay.
In this post I’ll unpack the drivers behind the projected rise, offer a sector-wise view, discuss implications and risks, and finish with practical advice for employees and leaders who want to make the most of 2026’s compensation environment.
What’s driving the projected rise
Several structural and tactical factors explain why the median projected increase is around 9%:
- Inflation and purchasing power: Even with moderating inflation, organisations are mindful of maintaining employee purchasing power. Base pay adjustments remain a primary lever.
- Skills scarcity and digital transformation: The race for talent with AI, data science, cloud and domain expertise is driving targeted pay increases for critical roles.
- Performance-linked pay and short-term incentives: Companies are shifting toward more outcome-driven compensation — a larger role for bonuses and short-term incentives rather than uniform across-the-board hikes.
- Strategic retention focus: With attrition stabilising at lower levels than during the peak churn years, firms are balancing headcount discipline with selective pay investment to keep high-impact employees.
- Regulatory and benefits environment: Changes in labour rules and social security expectations are nudging total cost-of-employment calculations, prompting employers to redesign reward mixes.
These forces mean the headline 9% is not an across-the-board guarantee — it’s a median that masks considerable variation between roles, skill sets and sectors.
Sector-wise outlook (what to expect)
The survey highlights that some sectors will outpace the average while others stay conservative:
- High-tech (product and consulting): Expected to see above-average increases (around 9.3%), reflecting demand for AI, cloud and product engineering talent.
- Automotive and manufacturing engineering: Forecasts show strong increases (around 9.5%) as supply-chain investments and EV transitions push demand for specialised engineers.
- IT, ITES and Global Capability Centres (GCCs): These sectors continue to offer competitive benefits and remain progressive on non-pay perks, with hikes close to the median but richer total reward packages.
- Consumer, retail and some services: More measured increases, with employers focusing on targeted incentives and benefits to protect margins.
Remember: the median headline number is a directional signal — individual outcomes will depend heavily on role criticality, location, performance and internal grade positioning.
Implications for employers and employees
For employers:
- Budgeting complexity increases: Firms will need to be more surgical — deciding where to invest base pay increases versus short-term incentives.
- The talent strategy shifts: Compensation is now a tool for shaping behaviour — getting buy-in for pay-for-performance and skills-based frameworks is vital.
- Total reward design matters: Employers that combine competitive pay with flexible benefits, learning pathways and career clarity will win in retention.
For employees:
- Negotiation power is role-dependent: If you occupy in-demand skill sets you will see outsized movements; for others, expect more modest increases and a higher share of reward tied to performance.
- Upskilling pays: Demonstrable, current skills (AI, cloud, data, domain-specific engineering) increase your bargaining leverage.
- Read the total package: With benefits, bonuses and flexibility increasingly central, assess offers on total reward, not just headline salary.
Potential risks and caveats
- Median vs. mean: The 9% figure is an average projection; many employees will see lower increases, and some high-demand roles will see bigger raises.
- Cost pressures and eligibility changes: Some organisations may tighten eligibility for increments to contain costs — fewer employees might receive the headline increases.
- Economic shocks: Global slowdowns, trade disruptions or domestic macro shocks could force mid-year adjustments to compensation plans.
- Inflation volatility: If inflation re-accelerates unexpectedly, the real value of increases could be muted.
Actionable tips — Employees
- Map your market value: Research current pay levels for your role and location and benchmark your skills against in-demand competencies.
- Prioritise skills that compound value: AI/ML, cloud-native engineering, cybersecurity, data engineering and domain expertise (e.g., EV powertrain, pharma regulatory) are the most likely to yield stronger pay outcomes.
- Make performance tangible: Keep a running portfolio of outcomes, impacts and metrics you can show in reviews.
- Negotiate total reward: If base is constrained, negotiate for a higher variable component, learning budget, or other benefits.
Actionable tips — Employers
- Adopt differentiation wisely: Use skills-and-performance frameworks to allocate limited budget to where it drives the most business value.
- Communicate transparently: Explain how increments, eligibility and incentives are decided; transparency reduces attrition risk.
- Invest in internal mobility and learning: Upskilling is cheaper and faster than external hiring for many roles.
- Revisit reward mix: Consider increasing short-term incentives tied to measurable outcomes to protect fixed costs while rewarding impact.
Conclusion
A projected 9% rise in India Inc’s pay in 2026 is welcome news, but it’s a directional signal rather than a universal guarantee. The real story is a shift toward more differentiated, skills- and performance-linked reward systems. That is good for organisations that get strategic about where they invest pay, and for employees who choose to upskill and make their impact visible.
If you’re an employee, treat 2026 as a year to sharpen marketable skills and be clear about your value. If you lead people, treat it as an opportunity to design reward systems that drive measurable outcomes and build long-term engagement.
Source: India Inc may witness 9% salary rise in 2026: Report (Times of India summary of Mercer’s Total Remuneration Survey 2026).
Regards,
Hemen Parekh
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