AI-driven rewards, flexible work and well-being perks are shaping the future of pay.
In brief
- The findings from the Future of Pay 2025 report make it clear that businesses must rethink traditional compensation strategies to attract and retain top talent.
- Organizations should prioritize data-driven compensation, holistic wellness, personalized benefits and flexible work models to enhance their Rewards Value Proposition (RVP) and ensure talent attraction and retention.
As businesses navigate an increasingly complex talent landscape, total rewards strategies are shifting from traditional pay structures to a more holistic, employee-centric approach. Total rewards are no longer just about base salaries and annual bonuses. Organizations are increasingly focusing on a workforce benefits strategy that aligns with employees' evolving expectations. This includes workplace financial wellness programs, hybrid work models, performance-linked pay, and long-term incentives. Companies that embrace these trends will remain competitive in job retention strategies, securing top talent in an evolving job market. The EY Future of Pay 2025 report highlights key trends shaping India's workforce and compensation landscape in the coming years.
Employee wellness as a retention strategy
Employee wellness has taken center stage as organizations realize the link between workforce health and productivity. A remarkable 92% of survey respondents indicate employer support for mental health initiatives, including counseling, virtual therapy, and training. Digital wellness is emerging as a priority, with 62.5% of organizations focusing on tools like screen time management and ergonomic support.
Redefining workplace perks: Flexibility and comprehensive benefits
Flexibility has become a cornerstone of modern total reward strategies, with flexible work now outweighing salary as a primary driver of job satisfaction. Employers are responding by offering hybrid and remote work models, compressed workweeks, and flexible scheduling. While these arrangements improve employee retention, companies must also foster workplace engagement to maintain a sense of belonging.
Beyond flexibility, organizations are prioritizing personalized employee benefits to cater to diverse needs. 78% of employers are focusing on customized perks, such as financial planning, childcare support, and caregiving assistance.
Health benefits are expanding, with 87.5% of companies now covering OPD, dental, and vision care. Workplace financial wellness is also gaining traction, with 50% of organizations offering programs like student loan assistance and savings plans. Moreover, 6% of companies support green commuting initiatives and volunteer days for environmental causes.
Family support remains a key focus, with 90% of organizations providing parental leave for all caregivers, childcare assistance, and return-to-work programs. These evolving workplace strategies reflect a holistic approach to employee well-being, integrating flexibility and comprehensive benefits to enhance job satisfaction and organizational success.
Industry trends: Salary increments remain strong but moderating
While salary growth remains robust, the pace is slowing slightly. The report projects an average salary increase of 9.4% in 2025, a marginal dip from 9.6% in 2024. Despite this moderation, certain industries continue to see strong salary hikes. E-commerce is expected to lead with a 10.5% increase, followed by financial services at 10.3%. The report suggests that in competitive sectors, employers need to look beyond annual increments and focus on holistic total rewards strategies, including performance-based incentives, AI-driven salary benchmarking and non-monetary benefits, to attract and retain employees.
Employee attrition shows decline: Rates drop from 18.3% in 2023 to 17.5% in 2024
The steady decline in attrition from 21.2% in 2022 to 17.5% in 2024 underscores a positive trend driven by economic stability, proactive retention strategies, and shifting employee priorities. Although voluntary attrition has declined from 15.2% (2023) to 14.1% (2024), organizations still require a continuous focus on retention strategies like career growth opportunities, competitive pay, and flexible work policies. Although attrition has declined across most sectors, it has increased in sectors like financial services, Global Capability Centers (GCCs) and traditional automotive due to high demand for specialized talent, increased mobility, and evolving industry dynamics.
The future of employee rewards: AI and data-driven compensation
As businesses evolve in the digital age, employee rewards are undergoing a major transformation, driven by HR technology trends, AI, data analytics, and real-time compensation models. Traditional reward structures are giving way to dynamic, performance-based incentives, tailored to individual contributions and business needs. According to the survey, 60% of companies plan to implement real-time rewards and AI-driven compensation within the next three years, signaling a shift towards more personalized and agile compensation strategies.
CEO compensation: A growing focus on performance and ESG
Executives' pay structures are also evolving, with an increasing emphasis on performance-linked incentives. CEO compensation in Nifty50 companies has risen to 18% to 20% from 2023 to 2024, with promoter CEOs earning significantly more than professional CEOs. The report also notes that 70% of CEO pay is now tied to business performance, ESG (Environmental, Social, and Governance) metrics, and long-term growth targets. As businesses align leadership compensation with long-term sustainability and stakeholder expectations, executives must focus on delivering measurable impact across financial performance, innovation, and ESG commitments.
Equity-based incentives: The long-term retention strategy
With talent retention becoming increasingly challenging, organizations are turning to equity-based incentives such as Employee Stock Option Plans (ESOPs) and Restricted Stock Units (RSUs). The report highlights that ESOP adoption has grown from 63% in 2020 to 75% in 2024, making it the most widely used long-term retention tool.
Long-term incentives provide employees with a sense of ownership and alignment with company growth. However, organizations must ensure these programs extend beyond senior leadership to create broader engagement and motivation across all levels of the workforce.
Looking ahead
The evolving employers compensation policies demand a strategic shift from traditional pay structures to a more data-driven, personalized AI-powered approach. Wellbeing, AI, personalized benefits, hybrid work structures, and long-term incentives are redefining how organizations reward employees. Organizations that proactively adapt to economic shifts and salary impact trends will be better positioned in an increasingly competitive job market. The EY Future of Pay 2025 report offers valuable insights to help business leaders navigate these changes and build resilient, future-ready workforce strategies.
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