AI push shrinks permanent tech jobs, drops pay packages as contractual hiring hits 75%

For decades, India's technology boom offered a clear bargain to young workers: a degree, a campus placement and the promise of steady employment. However, that trend is quietly fraying.

As companies across sectors accelerate their use of artificial intelligence, India's job market is shifting away from permanent hiring and toward contracts, short-term roles and third-party payrolls, especially for new entrants to the workforce. Staffing firm and labour experts say that the change is reshaping not only how young talents are hired, but also how long they can expect to stay employed.

In job roles tied directly to artificial intelligence, such as data annotation, model testing, GenAI content support and prompt engineering, most hiring is no longer permanent. According to foundit, between 60 and 75% of recruitment in these functions now takes place through contract, gig or internship arrangements.

"These roles were traditionally stepping stones into permanent technology careers," said Anupama Bhimrajka, VP, Marketing at foundit. "Now they are being designed as short-term or third-party payroll engagements while companies test and scale AI use cases".

The change reflects a broader recalibration underway in Indian enterprises. Over the next 3 to 8-year period, routine and rule-based job roles across corporate functions are expected to be increasingly handled by trained AI agents, said Kamal Karanth, co-founder of specialist staffing firm Xpheno.

'Sluggish freshers hiring'

The AI adoption across enterprises has led to a massive shift at the bottom of the hiring pyramid. Entry-level recruitment has fallen sharply, even as demand for experienced professionals has remained resilient.

In 2025, freshers accounted for roughly 15% of the total IT hiring, according to Kapil Joshi, CEO of IT Staffing, Quess Corp. Mid-level talent, by contrast, made up nearly two-thirds of demand, as companies sought workers who would contribute immediately without extended training.

'Contract-to-hire' model is becoming more common, industry executives said, allowing firms to evaluate skills and adaptability before committing to long-term roles. Permanent jobs, they said, are increasingly tied to workers' ability to work alongside AI systems rather than to tenure alone.

Shantanu Rooj, Founder and CEO, TeamLease Edtech, said companies are using contractual arrangements as a screening mechanism, not a substitute for permanent jobs. "Employers want young professionals who can add value from day one," he said. "Contractual hiring is becoming a pathway to assess readiness before committing to long-term roles".

'The shrinking salary'

Artificial intelligence is also altering how salaries are set. Compensation for coding, testing and support work has come under pressure due to increased usage of AI tools for these functions. At the same time, AI-aligned roles like data engineering, model lifecycle management, applied AI, and cybersecurity are moving toward premium compensation.

According to Quess’ AI Skill Trend Report, GenAI roles currently offer salaries 15-20% higher than standard machine learning positions, reflecting acute skills shortages and high commercial impact.

Yet even in these areas, companies are exercising caution. Time-to-fill for niche AI and digital roles has stretched to 45–60 days, prompting employers to experiment with layered pay structures. Entry-level AI talent and fresh graduates are often hired on contractual terms with lower fixed pay and strong learning components, while senior AI professionals benefit from variable pay, project incentives and skill-linked increments.

Over the longer term, some experts expect salary premiums to narrow further as AI capabilities mature. "Once enterprise-grade and agentic AI systems are fully deployed, compensation advantages will compress," Karanth added. Such a situation is highly plausible over the next 8-to 10-year period.

"An easy 20 to 30% drop in premium packages should be expected, unless talent upskills itself to compete with AI," he said. Workers who learn to use AI effectively are more likely to retain pricing power.

'Non-premium colleges hiring'

Amid sluggish hiring over the past three years, one notable shift has been the widening of job opportunities beyond elite campuses. Graduates from non-premium colleges are finding work through internships, project-based roles and AI operations teams.

Data by foundit showed that such roles now account for 52% of entry-level employment, with non-premium graduates forming the bulk of hires in AI data annotation, model testing, and AI operations. However, permanent hiring has decreased to 48%.

"Traditional pedigree-based hiring matters less than it used to," said Rooj. Candidates who acquire applied skills through certifications, apprenticeships and work-integrated learning are increasingly able to access roles that previously favoured only top-tier institutions," he added.

As AI adoption deepens, India's job landscape appears set for a prolonged transition--one that will reward skill over income stability and job security.