Benchmarking salaries in India
Reviewed by Mellow Editorial Team, HR & payroll content team
Benchmarking salaries in India means finding out what the market actually pays for a specific role, at a specific level, in a specific location — then deciding where you want to sit relative to that range. Done well, it helps you hire competitively and contain payroll costs at the same time.
What salary benchmarking actually involves
Benchmarking is not a one-time lookup. It is a process: gather credible data, match it to your roles, build pay ranges, and review them on a regular cycle.
The output is usually a pay range for each role — a minimum, midpoint and maximum. The midpoint represents your target for a fully competent employee in that position. You then decide whether your policy is to pay at, above or below the midpoint, and why.
Most companies in India benchmark at least once a year, ahead of appraisal cycles. If your industry is moving fast — technology, fintech, GCC hiring — you may need to refresh the data every six months.
Where to get reliable data
Published compensation surveys are the most rigorous source. Firms such as Mercer, Aon, Willis Towers Watson and Korn Ferry run annual India-specific surveys. Access costs money, but the methodology is consistent and the sample sizes are large.
Free or low-cost sources include:
- LinkedIn Salary Insights (useful for a directional read, especially for mid-market roles)
- Naukri and Glassdoor data (treat as indicative rather than definitive — self-reported figures can skew high)
- Industry associations and sector-specific reports, which some bodies publish annually
- Offers and counteroffers your own recruiters see in the market
Your own hiring data is often underused. If you track the salary expectations candidates state at the first interview, and the offers you actually make to accepted candidates, you build a real-time picture of the market you operate in.
Do not rely on a single source. Cross-reference at least two before drawing conclusions.
Key variables that move the number
India's labour market is highly segmented. A software engineer in Bengaluru and a software engineer in Bhopal are not in the same market. Keep these variables in mind:
Location. Metro cities — Mumbai, Delhi NCR, Bengaluru, Hyderabad, Chennai, Pune — command a premium over Tier 2 and Tier 3 cities. That gap has narrowed slightly with remote work, but it has not disappeared.
Industry vertical. Technology product companies typically pay more than IT services firms for the same technical role. Banking and financial services, pharmaceuticals and GCCs have their own norms.
Company size and stage. Early-stage startups often pay below market on fixed pay but offer equity. Listed companies and MNCs tend to pay closer to or above market on cash, with structured variable components.
Total cost to company (CTC) versus in-hand pay. Indian compensation is usually quoted as annual CTC. This includes the employer's EPF contribution (12% of basic), gratuity provisions, and any allowances. An employee's actual monthly take-home is meaningfully lower than CTC divided by twelve. When benchmarking, make sure you are comparing CTC to CTC, not mixing CTC with gross salary figures.
Building a pay range from benchmark data
Once you have market data for a role, a straightforward approach is the percentile method.
- P25 (25th percentile): the lower end of the range, suitable for entry-level or developing talent
- P50 (median): your midpoint, representing a fully competent hire
- P75: the upper end, for senior or scarce talent
Set your policy. A company that wants to attract top talent might target P60 or P75 as its midpoint. A company that competes on culture, learning or flexibility might deliberately sit at P50 and be transparent about that tradeoff.
Apply a band width around the midpoint — typically plus or minus 20–25% — to give managers room to place individuals based on performance and experience without creating an unstructured free-for-all.
Staying compliant while you benchmark
Pay ranges are a management tool, not a statutory requirement, but compensation decisions connect directly to statutory obligations. From 2025, India's four consolidated Labour Codes are in force. The Code on Wages, in particular, changes how wages are defined and has implications for the PF-eligible portion of salary — the higher the basic wage as a proportion of CTC, the higher the EPF deduction at 12% for both employer and employee.
Employees earning below the ESI wage threshold are covered under the ESI scheme, which adds a further employer contribution. These statutory costs are part of your actual cost per employee and must be factored into any benchmarking exercise.
For employees in higher income brackets, TDS obligations arise from the first rupee of taxable income under the new regime, which uses slabs rising to 30% with a 4% health and education cess. Employers deduct TDS monthly, file Form 24Q quarterly, and issue Form 16 annually. Understanding the tax impact on different salary structures helps you offer packages that are genuinely competitive on an in-hand basis, not just on paper.
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