Corporate India to maintain 9.5% salary increase in 2025: WTW survey

New Delhi: Corporate India is expected to offer a salary hike of 9.5 per cent in 2025, similar to the 2024 actual salary increase, as companies are balancing optimism with caution, a report said on Tuesday.

According to WTW’s latest Salary Budget Planning Report, the median salary increase in India is forecasted to rise by 9.5 per cent in 2025, similar to the 2024 actual salary increase of 9.5 per cent.

Salary increases in India continue to be the highest across the region. Markets such as Vietnam (7.6 per cent), Indonesia (6.5 per cent), the Philippines (5.6 per cent), China (5 per cent) and Thailand (5 per cent) are also projected to maintain a strong salary increase for next year.

The Salary Budget Planning Report is compiled by WTW’s Rewards Data Intelligence practice. The survey was conducted in April and June 2024. Approximately 32,000 responses were received from companies across 168 countries worldwide. The survey had 709 participants from India.

"While companies in India are optimistic about growth, they are balancing optimism with caution. The era of 'Great resignation' is behind us, both employers and employees are now seeking stability and the market sentiment is notably steadier," Rajul Mathur, Consulting Leader, Work and Rewards, WTW India said.

In 2025, salary increases across industries such as the Pharmaceuticals (10 per cent), Manufacturing (9.9 per cent), Insurance (9.7 per cent), Captives and SSO sectors (9.7 per cent) and Retail (9.6 per cent) are likely to be above the general industry salary median, whereas software and Business Services at 9 per cent are projected below the general industry median of 9.5 per cent.

"India's captive sector is thriving, with a forecasted jump from around 1,500 captives in 2023 to 2,000 by 2025. As the home to nearly half of the world's global capability centres, the country's rich pool of skilled talent is driving innovation and boosting projected salary increases”, Mathur added.

In 2025, variable payouts are projected to remain consistent at 12.5 per cent, following 2024's 12.6 per cent. As organisations prioritise performance, they are assigning larger portions of their variable pay budgets to top and above-average performers, ensuring talent is recognised and suitably rewarded.

"Organisations are placing a stronger emphasis on performance-based pay differentiation. This trend sees top performers potentially earning salary increments three times that of average performers, while above-average performers are expected to receive about 1.2 times the increment of an average performer," Mathur said.

In terms of hiring, almost 28 per cent of companies plan to add headcount in the next 12 months, while 68 per cent companies plan to maintain their headcount in 2025 as compared to the previous year.

With higher growth rates anticipated, India's voluntary attrition rate continues to be one of the highest in the region. However, it is observed that the voluntary attrition rates in India have reduced slightly from 11 per cent in 2023 to 10.8 per cent in 2024.

In addition, around 46 per cent of companies in India expect that their salary increase budgets for 2025 will be similar to 2024, while 28 per cent said that the budgets are likely to be lower than projected.

Concerns related to cost management, inflationary pressures, anticipated recession and a tighter labour market are the major factors influencing budget projections for 2025, the report said.