EY, in its report titled ‘Future of Pay 2025’, said 60% of Indian employers are keen to explore the potential of AI for employee rewards and compensation strategies over the next three years.
It said that 6 in 10 employers are looking to leverage AI across critical areas such as salary benchmarking, real-time pay equity analysis, and customizable benefits for employees.
Firms are poised to transition from manual pay benchmarking and fixed incentive models to AI-driven predictive analytics and real-time salary adjustments by 2028.
With AI-powered compensation platforms, companies can now personalize benefits, optimize reward structures, and ensure pay equity across diverse workforce demographics, the report said.
Furthermore, blockchain and smart contracts are emerging as key enablers of secure, transparent, and automated payroll processing, particularly for cross-border compensation.
The report revealed 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 rates dropped from 18.3% in 2023 to 17.5% in 2024.
Companies are increasing consideration for AI-skilled professionals, with roles like prompt engineering and machine learning seeing growing demand. Employees also anticipate AI transforming their careers, driving the demand for upskilling and adaptability.
As per the report findings, the e-commerce sector is expected to see the highest salary increments of 10.5% in 2025, driven by the rapid expansion of digital commerce, rising consumer spending, and technological advancements.
The financial services sector follows closely, with projected salary increments of 10.3% in 2025, driven by demand for fintech specialists, digital banking experts, and cybersecurity professionals.
The report findings cite that competitive salaries alone are no longer sufficient for retention. Employees highly value flexible hours, ability to choose in-office days and remote work options.