The Indian IT services sector, a $250 billion industry, is poised for moderate salary hikes in the 2024-25 fiscal year (FY25). As per industry experts, the average wage increase is expected to range between 4 percent and 8.5 percent, signaling a shift from previous years of higher salary increments. This moderation in salary hikes comes against the backdrop of global economic uncertainties, increasing adoption of artificial intelligence (AI), and the evolving skill demands within the industry.
The IT sector has been witnessing turbulent times due to various economic challenges. Krishna Vij, Vice President of TeamLease Digital, highlighted that the outlook for salary increases in FY25 remains cautious. She stated, “This slowdown is largely due to global economic challenges, reduced discretionary spending, and shifting business priorities. Companies are being more conservative with their salary budgets, and many have even pushed their appraisal cycles beyond the usual April-June period, making salary revisions less predictable in the current scenario.”
Organizations are focusing on cost-saving measures such as skill-based pay structures and talent acquisition from Tier-II cities. Additionally, instead of significant salary hikes, companies are increasingly relying on retention bonuses, employee stock ownership plans (ESOPs), and project-based incentives to compensate and motivate employees.
Among leading tech companies, Tata Consultancy Services (TCS) has taken the lead by announcing salary hikes ranging between 4 percent and 8 percent, effective April 2025. However, other major IT firms, including Infosys, Tech Mahindra, Wipro, and HCL Tech, are yet to make final announcements regarding their salary increments.
Janoo Motiani, CEO of Reed & Willow, noted that these firms are waiting to observe market movements in the second quarter (Q2) before deciding on salary revisions. “This cautious approach indicates the tempered growth and changing client demands in the market,” she added.
The global economic landscape has played a pivotal role in determining salary trends within the Indian IT sector. Several key factors are influencing this shift:
Economic slowdown and reduced spending have led many global clients of Indian IT firms to tighten their IT budgets due to recessionary fears, rising inflation, and geopolitical tensions. The banking, financial services, and insurance (BFSI) sector, a key revenue generator for IT firms, has particularly seen a reduction in discretionary spending.
The rapid adoption of AI-driven solutions has led to job redundancies in certain areas while increasing demand for AI-skilled professionals. Companies are prioritizing investment in AI and automation over large-scale workforce expansion, further moderating wage growth.
Firms are shifting from traditional outsourcing models to value-based services. Companies are moving towards a gig workforce, hiring contract employees rather than committing to long-term payroll expansions.
The attrition rate across the Indian IT industry has seen a decline, averaging 17.7 percent in 2024 compared to 18.3 percent in the previous year. While this decrease is a positive sign, companies still face the challenge of retaining high-performing employees, especially those with niche skill sets.
According to a report by Adecco India, while the average salary hike is projected to be between 6 percent and 10 percent, mid-level and senior professionals with in-demand skills could receive significantly higher salary jumps. Skills in cloud computing, cybersecurity, AI, machine learning (ML), and data analytics continue to command a premium in the job market.
With companies re-evaluating their salary structures, alternative compensation strategies are gaining traction. Several firms are shifting their focus towards performance-based incentives, bonuses, and incentives tied to project success and individual contributions. ESOPs and retention bonuses, stock options, and additional bonuses are being used to retain key talent. Upskilling and internal mobility are being encouraged, with employees reskilling in AI, data science, and cloud technologies to meet future business demands. Flexible work models, including hybrid and remote work, are becoming a key retention strategy, especially as employees prioritize work-life balance over marginal salary hikes.
For IT professionals, the changing salary landscape signifies the need to adapt to new trends. Experts recommend that employees focus on upskilling and acquiring certifications in high-demand technologies. Additionally, job seekers may have to recalibrate their expectations regarding salary hikes. Instead of across-the-board increases, companies are likely to focus on rewarding employees based on performance, critical skills, and contributions to business growth.
The FY25 salary outlook for the Indian IT services sector remains subdued as global economic challenges and technological transformations shape compensation strategies. While some companies, like TCS, have announced moderate hikes, many others are adopting a wait-and-watch approach. However, professionals with niche skills will continue to see lucrative opportunities despite the overall conservative salary hikes. As the industry navigates these changes, employees and employers alike will need to strike a balance between financial sustainability and workforce motivation.
