Barring the pandemic year of 2020, the present year has seen the lowest pay hike by the India Inc in almost 15 years, with subsequent appraisals too expected to be lacklustre.

Consulting firms have highlighted that retrenchments are on a five-year high owing to factors such as adoption of artificial intelligence (AI), tariff wars, and global uncertainty, reported Mint.

“The increments that we had projected were early on in the year, around February-March. That was before the impact of tariffs and volatile uncertainty... We were expecting the number to be a little lower than what they projected. But that it has fallen below 9% is remarkable. I think 0.1–0.2% fall is usually the case when there is a little bit of change in the uncertainty. It has fallen by 0.3%, meaning that during March–May, when most companies give increments, there was a lot of caution, plateauing down of expectations and rationalizing budgets,” Roopank Chaudhary, partner and rewards consulting leader at Aon, told the newspaper.

While an average increment of 9.2% for 2025 was projected by Aon, a study of over 1,060 firms in the Salary Increase and Turnover Survey 2025–26 revealed that the actual hike was only 8.9%.

This figure is the lowest in 15 years, except in 2020, when the Covid-19 lockdown was announced and companies were struggling with new strategies to keep their businesses alive. At the time, an increment of 6.1% was offered.

One of the reasons for the low hiring is a cut in the spending budgets after the US imposed punitive tariffs on Indian. Other factors such as prolonged wars, and a volatile economy across borders, have also contributed to it, reported Mint.

According to Aon’s report, 2026 will witness an average salary increment of 9% next year, reflecting that the next is year is also expected to be not much better for employees.

“The consulting sector is seeing more ‘pay for performance’ and is increasingly differentiating partners who have a strong personal standing in the market. Compensation hike at the partner level in switching firms is typically around 20%, down from about 40% during post-COVID heydays,” said Puneet Kalra, managing director for executive search firm Russell Reynolds Associates.

Aon’s data reveals that in 2025, when it comes to involuntary attrition or retrenchment, a 4.6% level is the highest after the 5.1% of 2020, the pandemic year.

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