The buzzword in the HR town is ‘employee engagement.’ Employers are trying their best to keep employees motivated and earn their trust and loyalty as they’ve understood the financial link 🖇️ between revenues, employee engagement, and performance.
86% of professionals are planning to change jobs. Not because they didn't get raises, or because their companies don't care, many do.
They're leaving because something fundamental has shifted in what people need from work. The traditional approach of salary hikes, bonuses, and added benefits isn't connecting the way it used to.
Indian companies are offering 9% salary increases in 2026 (the highest in Asia-Pacific), yet employees are more likely to explore other opportunities than stay. That gap tells us something important about what's changed.
Quick Summary
This article will help you understand:
- Why salary hikes work best alongside other meaningful benefits
- The financial incentives that resonate most with employees in 2026
- Non-financial benefits your team actually wants and will use
- How the new Labour Codes affect your benefits planning
- What different generations value most at work
With this in mind, organizations are using several methods to motivate employees. These include a good mix of monetary and non-monetary benefits.
Let’s go through the list of the top non-financial and financial incentives to motivate employees that you can use too.
What's Actually Happening With Salaries in 2026
Let's start with compensation, since it's still a foundation of any benefits conversation.
Salaries in India are projected to rise 9% in 2026, according to Aon's Annual Salary Survey. That's the highest in Asia-Pacific. After accounting for inflation, real wage growth sits around 4.9%—meaningful but modest purchasing power gains.
Different sectors show interesting variations. Real estate companies are offering 10.9% hikes. NBFCs hit 10%. Automotive reaches 9.6%. Technology consulting, once known for premium compensation, now averages 6.8% as the sector navigates AI disruption and shifting export dynamics.
What's particularly notable is how performance differentiation has evolved. Top performers now receive up to three times the increment of average performers (compared to 1.7x previously). Companies are investing heavily in critical talent while also expanding junior-level budgets to attract early-career professionals.
What Are Financial Incentives?
Financial incentives are nothing but monetary rewards, such as bonus payouts, salary hikes, and other financial benefits that employees receive for their dedication and hard work. These incentives are tangible and act as a direct motivation for employees. You can also view them as a form of compensation that goes beyond the regular paycheck and is linked with the performance of the company and the individual.
What Are Non-Financial Incentives?
Non-financial incentives are non-monetary benefits that an employee receives for their performance. Like financial rewards, this is not a part of the salary package and it’s above and beyond that. Broadly speaking, things like recognition, reward, opportunity, and flexibility, fall under the category of non-financial incentives. Some examples include awards, vouchers, gift cards, remote working arrangements, paid training and mentorship programs, and so on.
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Top 4 Financial Incentives That Connect With Employees in 2026
Money remains important—it's how people support their families, plan their futures, and measure professional growth. Here's what's working well in 2026:
Performance-Linked Bonuses With Clear Criteria
One of the most regularly used incentives to motivate employees is bonus payouts. They’re offered as a lump sum or as part of the employee paycheck. It’s an excellent way to appreciate employees, recognize their important milestones such as a work anniversary, or retain/attract new hires.
However, year-end bonuses have become expected. What makes a real impact? Bonuses tied to specific achievements with criteria shared upfront. Quarterly payouts often work better than annual ones because recognition closer to the achievement feels more connected.
When your sales team closes a challenging account, recognizing it within the month reinforces the connection between effort and reward. When your engineering team delivers ahead of schedule, immediate acknowledgment matters.
Retaining Your Best Employees
A quick and easy-to-read guide for retaining your best-performing employees
1. ESOPs With Genuine Liquidity Plans
62% of Indian companies now offer ESOPs, and 87% of founders believe they help retention. The problem? 2025 saw a 7% decline in buyback value, with just 12 startups conducting buybacks worth ₹1,409 crore.
Employees are getting smarter. They're asking: "When was your last buyback?" and "What's the actual liquidity timeline?" Paper wealth stopped impressing people years ago.
If you're offering ESOPs, have a clear answer to when and how employees can actually convert them to cash. PhonePe did a ₹700-800 crore buyback reaching about 1,000 employees. Rapido launched its first-ever ESOP liquidation. These aren't PR moves—they're proof the equity actually means something.
Without liquidity events, ESOPs are just expensive gift wrapping.
2. Profit Sharing When Structured Transparently
Profit sharing is another popular method to appreciate employees and a way to give them a financial advantage over and above their salaries. In this category, employers give a percentage of the organization’s profit to the employees as a way to motivate them.
Profit sharing creates alignment during good periods. The key is structuring it as additional upside rather than baseline compensation.
Some companies share a percentage of quarterly profits above target with all employees, proportional to contribution. When the company has a strong quarter, everyone benefits. When results are modest, expectations are already aligned.
Transparency matters enormously. Sharing actual numbers—revenue, costs, margins—builds trust even when payouts vary. Employees appreciate understanding the business reality.
3. Enhanced Retirement Benefits
Something unexpected has emerged: younger employees are increasingly interested in retirement planning. 41% of Indian employees have taken side gigs to manage inflation, and 62% of millennials manage tight monthly budgets.
Financial security matters. Companies offering enhanced NPS contributions beyond statutory requirements are finding genuine appreciation. It's less about planning for age 60 and more about "What if my circumstances change?"
The new Labour Codes make this more relevant, with EPFO now allowing 100% withdrawal after job loss (versus 75% previously), so employees see these benefits as practical safety nets.
4. Thoughtful Salary Corrections (Salary Hikes)
Sometimes people were hired below market rate during different market conditions. They've been performing well, contributing consistently, but the standard annual hike keeps them perpetually below peers in similar roles.
Salary corrections address structural gaps. They require investment, but they're often more cost-effective than losing good people and hiring replacements at premium rates.
Salary hikes are a sure-shot way to make sure employees are motivated and enhance job satisfaction. Employers must offer competitive salary raises in line with market standards and even consider offering salary corrections for those who were hired under par in terms of pay.
Secrets To Attract Talent Beyond Compensation
Bring innovation to your hiring and win over candidates beyond salary.
6 Non-Financial Incentives To Motivate Employees in 2026
For the first time in Randstad Workmonitor's 22-year survey history, work-life balance surpassed pay as the top priority globally. In India, 78% of employees now prioritize family time over career advancement.
This tells us something important: people aren't necessarily less committed to their work. They've realized that sustainable careers require taking care of their health, relationships, and overall wellbeing alongside professional achievements.
Here are the non-financial incentives making a real difference:
1. Flexible Working Arrangements
57% of Indian companies have implemented structured hybrid models, and 88% of employers recognize flexibility as essential for retention. 49% of employees would actively consider other opportunities if required to work fully on-site.
Flexibility has become foundational for most roles.
The organizations finding success offer structured hybrid approaches—typically 2-3 days in office per week with team-specific adjustments. TCS developed the 30-40-30 model (30% remote, 40% office, 30% flexible). Infosys provides employee choice in arrangements.
What enables this? Trust. Flexibility works when managers focus on outcomes rather than monitoring activity. Employees notice the difference immediately.
2. Comprehensive Mental Health Support
80% of Indian workers reported mental health challenges in the past year. 42.5% of corporate employees experience depression or anxiety. India's corporate burnout rate reached 78%—significantly above global averages.
This represents a genuine workplace health crisis.
Companies responding effectively aren't offering token gestures. They're building real support: 24/7 counseling access, mental health days (distinct from sick leave), manager training on supporting team wellbeing, and creating environments where discussing mental health isn't stigmatized.
Bank of Baroda launched an enhanced Employee Assistance Program for 75,000+ employees in January 2025. Companies partnering with platforms like Loop Health, MindPeers, and Wysa are seeing meaningful engagement.
The business case is clear: according to ASSOCHAM's research on preventive healthcare, every ₹1 spent on employee wellness generates ₹133 in savings on absenteeism costs and ₹6.62 in reduced healthcare costs. Mental health support forms a critical component of comprehensive wellness programs that deliver these returns through reduced absenteeism and sustained productivity.
3. Learning and Development Opportunities
This statistic is worth pausing on: 67% of Indian employees would consider leaving without learning opportunities (versus 41% globally). 43% identify AI training as their most desired opportunity.
More than two-thirds of employees view learning as essential to staying—not a perk, but a fundamental need.
Yet only 24% receive full employer sponsorship for development, while 46% fund their own learning. That's a significant gap between what employees need and what companies provide.
What's working: subscriptions to learning platforms (LinkedIn Learning, Coursera, Udemy Business), certification sponsorships (AWS, Azure, PMP, Six Sigma), dedicated learning time during work hours, and skill development tied to career progression.
The best implementations don't just fund courses, they connect learning to real career growth. An engineer who completes AWS certification gets first opportunities for cloud projects, not just a certificate.
4. Meaningful Peer Recognition
Recognition costs remarkably little yet creates significant impact when done well.
Organizations succeeding here have moved beyond quarterly awards. They've built recognition into daily work: channels for public appreciation, spot bonuses from peer nominations, regular meaningful awards, and training managers to give specific, actionable feedback.
One Bangalore tech company lets employees award "Kudos points" to colleagues, redeemable for experiences like dinners or wellness sessions. Cost per employee averages about ₹500 quarterly. The morale impact exceeds what a 1% salary increase would create.
Recognition works when it's frequent, specific, peer-driven, and clearly connected to behaviors the organization values.
5. Comprehensive Health Insurance
Medical inflation in India runs at 12-15% annually—roughly double general inflation. A cardiac bypass costing ₹2.5 lakh in 2014 now ranges from ₹4.5-6 lakh. Cancer treatment exceeds ₹15-25 lakh.
The ₹3-5 lakh coverage that felt adequate five years ago barely covers major health events now. Organizations thinking ahead are moving to ₹10 lakh+ coverage with family floater options including parents, top-up covers for critical illnesses, OPD benefits, and preventive health programs.
What really matters is accessibility. The companies making health benefits valuable aren't just increasing coverage—they're making healthcare actually usable. 24/7 medical advisors, unlimited doctor consultations, seamless claims support, and wellness programs that help prevent serious health issues.
At Loop, this is exactly what we focus on, making healthcare work the way it should for employees and their families.
6. Genuine Paid Time Off
Unlimited PTO sounds ideal but often results in employees taking less leave due to unclear norms and subtle pressure around dedication.
What works better? Generous defined PTO (25-30 days annually) with minimum leave policies requiring at least 15 days taken. Some companies even incentivize using all allocated leave.
One consulting firm implemented "no meetings in December" firmwide. Not suggested—required. The reset effect on team energy was substantial.
Time off only creates real rest when people have genuine permission to disconnect. No messages. No "urgent" emails. No expectation that vacation means "working from a different location."
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How Well Can Financial Incentives Affect Employee Motivation And Morale?
Providing financial incentives can greatly impact the morale of employees. Depending on the nature of the business, different motivators have different effects on the performance of employees.
GOOD TO KNOW: 10 Easy And Efficient Ways To Increase Morale At Work
Generally speaking, financial incentives are a tangible and direct form of motivation that can positively enhance employee morale, and in turn, enhance company revenues as well.
At the same time, though, don’t overlook or ignore the importance of non-financial incentives. Non-monetary rewards, such as remote working and paid time off time and again, have been shown to have an excellent impact on employee engagement.
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Understanding Different Generational Perspectives
Gen Z comprises 27% of India's workforce. Millennials form 70% of many companies. Gen X provides experienced leadership. They each bring different perspectives on what makes work meaningful.
Gen Z (Born 1997-2012): Flexibility and Purpose
Only 16% of Gen Z prefer traditional full-time employment. 43% want full-time work with space for side projects. 38% plan to stay less than one year in their current role.
They prioritize:
- Competitive compensation (50% cite inadequate pay as a reason for leaving)
- Flexibility in work arrangements (25% cite this as key to staying)
- Work that aligns with personal values
- Strong work-life boundaries
They're less focused on:
- Long-term retirement benefits
- Traditional career ladders
- Dependent health coverage (most haven't started families yet)
What resonates: Purpose-driven work, immediate skill development, autonomy in when and where they work, transparent leadership communication, and companies whose values align with their own around sustainability and social impact.
Millennials (Born 1981-1996): Growth and Impact
97% of millennials value hands-on learning. 85% engage in weekly upskilling. Yet 62% manage tight budgets despite growing professionally.
They stay for:
- Clear growth paths
- Development opportunities
- Meaningful work
- Strong team culture
They worry about:
- Financial stability (29% report frequent stress)
- Healthcare costs (21% concerned about affordability)
- Job security amid industry changes
What motivates them: Companies investing in their development, providing visible advancement opportunities, offering solid health benefits (they're often supporting families), and balancing compensation with work they find meaningful.
Gen X (Born 1965-1980): Stability and Expertise
Gen X shows high engagement but distinct priorities. They value job security with work-life balance, comprehensive medical coverage (they're in peak healthcare expense years), and recognition for their experience.
46% want AI training—the highest interest across all generations. They understand changes coming and want to stay relevant.
What motivates them: Respect for experience, organizational stability, comprehensive health benefits including elder care, retirement planning support, and development opportunities that build on their expertise.
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What The New Labour Codes Mean For Benefits
Four Labour Codes became effective November 21, 2025. This is a good time to review your benefits structure.
The significant change: Basic salary plus DA must constitute minimum 50% of total compensation. This affects take-home pay structures and gratuity calculations.
For employees: Fixed-term employees now receive equal benefits as permanent staff and qualify for gratuity after just one year (versus five years previously). Everyone receives mandatory appointment letters. Workers over 40 are entitled to free annual health check-ups.
For gig workers: Platforms must contribute 1-2% of annual turnover to social security funds, bringing formal recognition and protection to the gig economy.
EPFO updates: Withdrawals now allow up to 100% of eligible balance (maintaining 25% minimum), education withdrawals expanded significantly, and unemployment provisions allow 75% immediate withdrawal after job loss.
These are legal requirements. The opportunity is using these changes to genuinely strengthen your employee experience rather than just achieving compliance.
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What Actually Improves Employee Engagement and Performance
Let's talk about practical steps that work:
Have real conversations. Anonymous surveys give you partial pictures. One-on-one conversations with diverse employees across levels, functions, and backgrounds reveal what people actually need. Ask directly: "What would make you want to stay here for the next two years?" and "What factors would lead you to explore other opportunities?"
Recognize different needs. A 24-year-old developer and a 42-year-old manager have different priorities. Your benefits approach should acknowledge this. Build flexibility into how people access and use what you offer.
Invest in prevention. Companies spend lakhs treating serious health issues but hesitate to invest ₹15,000 in preventive programs. India's corporate wellness market reached $2.5 billion as organizations realized prevention delivers better outcomes at lower costs.
Make benefits easy to use. The best benefit that nobody accesses isn't really a benefit. If employees need multiple approvals and lengthy waits to use mental health counseling, they won't use it. Reducing friction dramatically increases utilization.
Measure what matters. Benefit utilization rates matter more than cost per employee. Retention of strong performers matters more than average tenure. Employee referrals matter more than total applications. Focus on outcomes.
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Why Health Benefits Deserve Special Focus
Comprehensive health insurance consistently tops employee benefits surveys in India for good reason. Medical inflation at 12-15% annually means healthcare costs double every 5-6 years. Many Indian families are one serious illness away from financial difficulty.
Here's what many companies miss: health benefits aren't just about paying hospital bills. They're about preventing the hospital visit entirely.
Loop's approach combines insurance coverage with 24/7 medical advisor access, unlimited doctor consultations, preventive wellness programs, and smooth claims support. We focus on this because we've seen what happens when healthcare actually serves employees well.
Employees maintain better health. They take fewer sick days. They worry less about medical costs. They appreciate their employer's genuine care about their wellbeing. And they're more likely to stay.
If you're choosing one benefit that simultaneously impacts retention, productivity, and employee wellbeing, comprehensive health coverage delivers across all three.
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Moving Forward With Your Benefits Strategy
The fact that 86% of Indian professionals are considering job changes despite receiving salary hikes tells us something important: compensation alone isn't enough anymore.
Money remains foundational. But employees also want flexibility to manage their lives well, mental health support to sustain their wellbeing, learning opportunities to stay relevant, health benefits that cover their families, and work that feels meaningful beyond the paycheck.
The companies succeeding in 2026 aren't necessarily paying the highest salaries. They're building comprehensive experiences that recognize employees as whole people with complex lives.
Start with honest conversations about what your team actually needs. Build flexibility into benefit access. Invest in prevention and wellbeing, not just compensation. Make everything easy to use. And measure real outcomes.
Your talent landscape includes every company that's figured out how to make work sustainable and rewarding for the long term.
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Strengthen Your Employee Benefits With Loop
Health is the foundation that everything else builds on.
Loop's comprehensive health offerings include 24/7 medical advisor support, unlimited doctor consultations, preventive wellness programs, seamless claims support, and transparent insurance coverage. We help your employees stay healthy rather than just covering them when they're sick.
To learn more about Loop's group health insurance and wellness programs, get in touch with us.
