New Delhi: Average employee salaries in India are expected to rise by 9 per cent in 2026, with organisations increasingly focusing on short-term incentives and skills-based pay frameworks, according to Mercer's Total Remuneration Survey 2026.

The survey, which covered more than 8,000 roles across over 1,500 companies, highlighted that companies are moving toward broader, more holistic value propositions. The main factors driving salary increases include individual performance, inflation, and the organisation’s competitiveness in the job market.

“Our survey shows most organisations in India will continue to plan pay increases in line with balancing cost pressures and talent retention. Alongside this, there is a growing emphasis on skills-based organisation architecture, talent assessments to better align workforce capabilities with evolving business needs and pay programs to drive desired outcomes,” said Malathi KS, Mercer's Rewards Consulting Leader India.

As companies adapt to digital transformation, scarcity of in-demand skills, and rising importance of benefits and employee well-being, they are redesigning rewards strategies to build a more resilient, future-ready workforce.

“These shifts present Indian organisations with significant opportunities to strengthen workforce engagement and shape a more agile and inclusive workplace,” Malathi added.

Short-term incentives such as bonuses are leading to a stronger focus on near-term performance alignment, cost efficiency, and transparent, skills-based pay frameworks to support evolving workforce needs, particularly in the context of AI adoption and productivity priorities.

The report also noted that newly approved labour codes will enhance the social security net and preventive healthcare for employees.

Sector-wise, High Tech (product and consulting) and Automotive sectors are set to offer the highest salary increases at 9.3 per cent and 9.5 per cent respectively, while IT, ITES, and Global Capability Centers (GCCs) continue to lead in innovative employee benefits aimed at well-being and engagement.

“As India embraces digital transformation, navigates shifting workforce expectations and sharpens its focus on productivity, revisiting the number of employees eligible to receive an increment is a strategy being adopted by some companies to manage cost. This is a time for leaders to review their priorities and build stronger cultures embedded in a high-performance ethos, making empowerment and accountability go hand in hand, and fostering a fit-for-purpose value proposition,” said Mansee Singhal, Mercer’s Career Business Leader, India. IANS