Next Appraisal Cycle Presents New Challenges for Employees

Salary Increments in India Inc Expected to Remain Stable in 2026

According to the Deloitte India Talent Outlook 2026, salary increments across India Inc are expected to remain broadly stable in 2026, with companies projecting an average pay hike of 9.1 percent. This compares with an average increment of 9 percent in 2025, indicating limited movement in overall compensation budgets.

The report highlights that organisations are balancing the need to retain critical talent with a stronger emphasis on productivity and cost discipline. As a result, salary increases are being distributed more selectively, with higher rewards for top performers and employees with critical skills.

Sector-wise Divergence in Pay Hikes

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The Deloitte report showed that increments vary across sectors based on growth outlook and hiring needs. Financial services and manufacturing companies are maintaining relatively higher salary increases, while technology firms are moderating projections.

In the IT sector, product companies are expected to offer average hikes of 9.2 percent in 2026, slightly lower than 9.3 percent in 2025. IT services firms are projected to reduce increments more sharply to 6.9 percent from 7.6 percent a year earlier. Global capability centres (GCCs) are also expected to see a marginal decline to 8.8 percent from 9 percent.

Consumer-facing sectors are expected to see moderate increases. Consumer products companies may offer hikes of 8.7 percent in 2026 compared with 8.3 percent in 2025, while FMCG firms are projected at 8.6 percent, up from 8.2 percent. E-commerce firms may see increments of 9 percent, slightly higher than 8.7 percent last year.

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Life sciences and healthcare-linked sectors are expected to remain among the highest payers. Pharmaceutical companies are projected to offer 10.1 percent hikes, while clinical research organisations may see increments of 10.2 percent. Medical technology firms are expected at 9.2 percent.

Manufacturing-linked sectors are also expected to sustain higher increments. Automotive OEMs may offer 10.3 percent hikes, semiconductor companies 10.1 percent, and engineering manufacturing firms 9.6 percent, according to the report.

Bell Curve Sharpens as Firms Reward Top Performers

The report said organisations are increasingly differentiating pay outcomes based on performance ratings. Companies have reverted to operating within a narrow range of salary increases while allocating higher increments to top performers.

Data from the survey showed that the share of employees receiving the highest performance rating declined to 7 percent in 2025 from 10 percent in 2024. At the same time, about 16% of employees were placed in the bottom two performance categories.

The report added that this distribution reflects a sharper bell curve, where a smaller pool of employees receives a larger share of increments.

Promotions Rise Even as Top Ratings Fall

Despite fewer employees receiving top performance ratings, promotion rates increased. The share of employees promoted rose to 14 percent in 2025 from 12 percent in 2024, according to the report.

Deloitte said promotion levels are now nearly twice the proportion of top-rated performers, indicating that companies are rewarding both current performance and future potential. It noted that organisations would need to balance promotion decisions to avoid long-term title inflation.

Attrition Edges Higher Amid Layoffs

The report said attrition increased marginally to 17.6 percent in 2025 from 17.4 percent in 2024. It attributed the rise primarily to higher involuntary attrition, including layoffs across sectors, rather than an increase in hiring activity.

Deloitte added that companies are not responding with proportionately higher salary increments, indicating a stabilising labour market. It also noted that talent supply has improved, supported by hiring from Tier-2 and Tier-3 cities and stronger campus recruitment pipelines.

Skills-based Hiring and Digital Learning Gain Ground

Organisations are increasingly adopting a skills-based approach to talent management, the report said. Around 75 percent of companies now have both behavioural and technical competency frameworks integrated into performance management systems.

The report added that nearly 70 percent of training delivery has shifted to virtual formats, although companies continue to report stronger outcomes from in-person learning.

Among key challenges, nearly 60 percent of companies cited assessing skill gaps and keeping pace with evolving technologies as a primary concern. Other challenges include balancing business priorities with time for learning and measuring the impact of training initiatives.