In a recent development, Tata Consultancy Services (TCS) has made headlines for reducing the variable pay of its senior employees for the January-March quarter. This decision marks the third consecutive quarter that India’s leading software services provider has implemented cuts in variable compensation for certain staff members, raising eyebrows among its workforce.

Variable Pay Cuts Across Senior Staff

According to a report by Moneycontrol, an anonymous TCS employee revealed that variable pay constitutes about 15-20% of the Cost to Company (CTC) for senior roles. “The company has been deducting the Quarterly Variable Allowances (QVA) for more than a year now. Last quarter, I received only around 20% of my expected variable compensation,” the employee stated.

• Senior employees affected by these cuts are feeling the impact, as the variable component is significant in their overall compensation.
• In contrast, junior-level staff often receive minimal or no variable pay, further highlighting disparities within the organization.

Company Response to Compensation Concerns

Despite the claims regarding pay cuts, TCS has officially refuted the report, stating, “We have disbursed 100% QVA to over 70% of our employees. For others, the QVA is contingent on their unit’s business performance, which follows our standard practices.”

The company first introduced a new policy in July 2024 that linked variable pay to office attendance, continuing this trend into subsequent quarters. Even employees adhering to the work-from-office guidelines reported receiving only 20-40% of their QVA in the last quarter.

New Attendance Policy Impacting Pay

TCS’s attendance policy, effective from April 2024, has stringent criteria for variable pay eligibility:

• Less than 60% attendance: No variable pay.
• 60% to 75% attendance: 50% of variable pay.
• 75% to 85% attendance: 75% of variable pay.
• More than 85% attendance: Full variable pay.

This shift has left many employees feeling uncertain about their compensation.

Delayed Salary Increments Amid Economic Uncertainty

In addition to variable pay adjustments, TCS announced a delay in annual salary increments previously scheduled for April 2025. This decision stems from ongoing global economic uncertainties and concerns over tariffs. During a post-earnings conference in Mumbai, Milind Lakkad, TCS’s Chief Human Resources Officer, mentioned, “Given the unpredictable environment, we will determine wage hikes throughout the year, timing them according to business needs.”

Typically, TCS revises salaries in the first quarter, with adjustments paid in the second quarter. However, this year, the timeline for changes remains unclear, with Lakkad indicating that the size of potential hikes will depend on business developments in the coming months.

Commitment to Employee Development

Despite the postponement of wage increases, Lakkad assured stakeholders that TCS remains dedicated to investing in its workforce, particularly in training programs. “There will be no reduction in training investments for trainees, lateral hires, or current employees,” he emphasized.

Signs of Recovery and Future Outlook

CEO K. Krithivasan noted that there were initial signs of recovery in discretionary spending during the third quarter, although this trend slowed in the fourth quarter due to persistent global uncertainties. “Since mid-February, we’ve seen some projects scaling back, but there haven’t been significant cancellations,” Krithivasan remarked.

During the January-March quarter, TCS added 625 employees, reversing a decline of 5,370 in the previous quarter. By the end of March 2025, TCS’s workforce totaled 607,979, marking an increase of 6,433 employees for the fiscal year. Notably, TCS promoted 110,000 employees across all quarters in FY25.

Future Hiring Plans and Attrition Rates

TCS’s hiring strategy remains robust, with Lakkad confirming that the fresher hiring program is on track. “We onboarded 42,000 trainees in FY25 as planned, and we anticipate onboarding a similar or larger number next year,” he shared.

However, attrition rates have seen a slight uptick, rising to 13.3% in the March quarter compared to 13% in the preceding quarter. This marks the third consecutive quarter of increasing attrition, although Lakkad noted a decrease in the annualized attrition rate by 130 basis points from previous highs.

In conclusion, while TCS navigates through a challenging economic landscape, its strategic decisions regarding employee compensation and hiring indicate a commitment to maintaining a skilled workforce while adapting to market conditions.