IT Firms to Offer 3-6% Hikes

IT attrition rate is expected to be around 12%-13% this year.

India's $250 billion information technology sector is expected to roll out modest salary appraisals in the range of 3 to 6 per cent in FY26, HR experts said.

It comes at a time when firms are witnessing a spike in attrition, even as top players have reported higher turnover in Q3FY25. Industry experts assert that this is not a sign of a demand-driven market shift.

According to reports, the IT attrition rate for this year is expected to be around 12 to 13 per cent.

"Higher hike rates are indicative of a buoyant revenue outlook. In the current trajectory of revenue performance and outlook for recovery, the potential salary hike range remains in the 3 per cent to 6 per cent median range," said Kamal Karanth, co-founder, Xpheno, a specialist staffing firm.

While some high-performing employees may receive exceptional raises, Karanth cautioned that the majority should brace for "moderated hikes" in line with inflation adjustments.

In recent times, the uncertain global environment and the resultant pressure on demand has meant that several companies are moving away from the traditional salary hike cycles.

For many, the appraisal cycle within the IT sector would be April-June, and is now in many cases to the third quarter or September-October time frame.

India's largest IT services player, Tata Consultancy Services, has begun its annual appraisal cycle for FY26. It is among the few players, which is still holding to the traditional time frame.

The company announced a salary hike of 7 to 8 per cent on average for employees in FY25, while top performers received hikes in double digits.

In the case of Infosys, salary hikes for FY25 have taken place in two phases.

The junior employees received their appraisals in January, while the rest will be getting in April.

Infosys CFO Jayesh Sanghrajka indicated that the salary hikes in India on an average will be in the range of 6 to 8 per cent.

According to data from Xpheno, the IT sector is yet to come out of the woods in terms of hiring.

After a brief recovery in active talent demand in September-October 2024, numbers have moderated and gone sluggish again.

The current active job openings from the IT sector collective, with a four-week freshness cutoff, is a little over 122,000. It is important to note that the IT services sector is far from a full recovery in talent action.

The cohort's monthly active demand volume has not crossed the 100K mark since July 2022 when the slowdown began.

The cohort had put out active demand in the 140,000 to 150,000 during the post-pandemic hiring buoyancy.

"All the companies have taken a cautious approach and the main focus for them is cost control and retention of talent.

"I think most of the IT services companies will look at selective pay hikes and be more inclined towards variable pays rather than fixed salary hikes," Krishna Vij, vice-president, IT staffing at TeamLease Digital, said.

"The hikes will be more targeted towards high performers to retain the best of talents," Vij added.

Experts pointed out that the slow and low rise in attrition numbers noticed in the past quarters, is not indicative of a market demand-triggered rise.

TCS reported attrition of 13 per cent, despite the fact that it had a headcount decline of 5,000 in Q3 FY25. TCS attrition in Q2 FY25 stood at 12.3 per cent.

Similarly, attrition in Infosys was up 13.7 per cent for Q3 FY25, compared to 12.9 in the preceding quarter of FY25.

Bengaluru-based Wipro's attrition inched up to 15.3 per cent from the earlier quarters 14.5 per cent.

Wipro also saw its headcount fall by 1,157, while HCLTech also saw its attrition go up to 13.2 per cent.

HR experts, however, pointed out that attrition-linked talent action does not typically drive a rise in salary hikes, unless it's done for retaining key talent.

Retention linked hires, in current market conditions will be few and far apart.

With "no major war" for talent in play, enterprises are under no pressure to offer 'unusual hikes for hiring or retaining talent' said Karanth.

The overall hikes in the sector are always tightly bound to their performance and net growth outlook of the sector.

This is evident from the fact that variable pay at several companies are getting impacted due to the slow demand environment.

Senior executives for instance saw their variable pay getting cut in the range of 20-30 per cent at TCS.

Variable pay depends on the performance of the company and the business unit.

"We all know that some sectors are under pressure. Especially sectors like financial services and manufacturing," a senior executive of an IT company said.

"If the business unit has not done well, how can someone get 100 per cent variable pay. It will be cut," the executive added.

TCS junior employees have received 100 per cent pay outs. Those who have not received it depends on the attendance and performance.

As the Indian IT sector navigates this phase of cautious hiring and controlled salary hikes, employees may have to recalibrate their expectations.

While selective increments will reward high performers, overall pay adjustments will remain moderate, reflecting the broader economic climate and industry outlook.

Feature Presentation: Ashish Narsale/Rediff.com