India Inc to see average salary hike of 9.4% in 2025, e-commerce to lead with 10.5% growth: Report

India’s formal sector, or India Inc, is poised to witness an average salary increase of 9.4% in 2025, according to the EY Future of Pay report. In 2024, the hike stood at 9.6%.

As many as 6 out of 10 Indian employers want to explore the use of artificial intelligence (AI) for employee rewards and compensation strategies over the next three years, the report said.

"The report reveals that India Inc is set to witness an average salary increase of 9.4% in 2025, a slight moderation from the 9.6% recorded in 2024. Overall employee attrition rate dropped from 18.3% in 2023 to 17.5% in 2024," it said.

Around 60% of employers are looking to leverage the potential of AI across crucial areas including salary benchmarking, real-time pay equity analysis and customisable benefits for employees, it added.

The report noted that companies are ready to use AI-driven predictive analytics and real-time salary adjustments by 2028, transitioning from the current methods of manual pay benchmarking and fixed incentive models.

"With AI-powered compensation platforms, companies can now personalise benefits, optimise reward structures, and ensure pay equity across diverse workforce demographics," the report said.

Additionally, blockchain and smart contracts are turning out to be key tools for secure, transparent and automated payroll processing, especially for cross-border compensation.

EY Future of Pay report: Key highlights

• The e-commerce sector in India is expected to see the highest salary hike of 10.5% in 2025, fueled by the exponential growth of digital commerce, tech advancements and increasing consumer spending.

• The financial services sector follows with a projected salary growth of 10.3% in 2025, driven by increased demand for fintech specialists, digital banking experts and cybersecurity professionals.

• Salaries in Global Capability Centres (GCC) are estimated to grow at 10.2% in this calendar year, up from 10% in 2024, on the back of continued investment in digital transformation and automation.

• IT and IT-enabled services sectors, however, are seeing a slowdown in salary increments due to automation, cost optimisation and a slower pace of hiring. Salaries in the IT sector are expected to be at 9.6% in 2025, down from 9.8% in 2024, while the IT-enabled services sector salaries are expected to decrease to 9% in the current year from 9.2% in 2024.

• Salaries in automotive, pharmaceuticals and manufacturing sectors continue to remain steady.

CEO compensation

CEO pay in NIFTY50 companies increased by 18-20% from 2023 to 2023, depicting a major increase in executive compensation.

Interestingly, promoter CEOs earn 30-40% more than professional CEOs and there is an increasing preference for internal promotions with 40-45% of overall CEO hiring in the last five years being internal.

"The report highlights that 70% of CEO compensation is performance-linked, with incentives tied to business growth, ESG (Environmental, Social, and Governance) goals, and long-term sustainability," it said.