Tata Consultancy Services (TCS), India’s leading IT services firm, has implemented a reduction in quarterly variable pay for its senior employees for the second consecutive quarter. This move comes despite these employees adhering to the company’s stringent work-from-office (WFO) policies. The decision has sparked discussions across the industry, shedding light on TCS’s performance-linked compensation strategies and the broader challenges facing the IT sector.
📉 Overview of the Variable Pay Reduction
- Affected Quarters: July–September 2024 (Q2 FY25) and October–December 2024 (Q3 FY25)
- Extent of Reduction: Senior employees received between 20% to 40% of their expected quarterly variable allowances (QVA), with some receiving no payout at all.
- Comparison to Previous Quarters: In Q1 FY25, the average QVA payout was approximately 70%.
An anonymous TCS employee reported, “I was supposed to get ₹50,000–₹55,000 in QVA, but last quarter I got half, and this quarter it was even less, at a fourth.
🏢 Work-from-Office Policy and Its Impact
In April 2024, TCS revised its attendance policy, linking variable pay to office attendence.
- 85% and above attendance: Eligible for 100% QVA
- 75%–85% attendance: Eligible for 75% QVA
- 60%–75% attendance: Eligible for 50% QVA
- Below 60% attendance: Ineligible for QVA
Despite meeting these attendance requirements, senior employees still faced reduced variable pay, indicating that other factors influenced the decision.
📊 Business Unit Performance as a Determining Factor
TCS has clarified that while junior employees received full QVA, payouts for senior staff were contingent upon the performance of their respective business units. This approach aligns with the company’s standard practice of linking compensation to business performance.
An employee noted, “Employees in business units with strong performance have been granted 100% of their variable pay, while those in sectors or verticals that reported poor growth have received lower payouts.”
📈 TCS’s Financial Performance Amidst Pay Cuts
In Q3 FY25, TCS reported:
- Net Profit: ₹12,380 crore, marking an 11.9% increase from ₹11,058 crore in Q3 FY24.
- Revenue: ₹63,973 crore, a 5.6% year-on-year growth.
- Headcount: A reduction of 5,370 employees, reversing two consecutive quarters of workforce expansion.
Despite these positive financial indicators, the company cited challenges such as a slowdown in discretionary spending and economic uncertainties as reasons for the cautious approach to variable pay.
🧠 Conclusion
TCS’s decision to reduce variable pay for senior employees, even amid satisfactory attendance and overall company profitability, underscores the firm’s emphasis on aligning compensation with individual business unit performance. This strategy reflects a broader trend in the IT industry, where companies are increasingly adopting performance-based compensation models to navigate economic uncertainties.
As the industry continues to evolve, employees and stakeholders must stay informed about such policy changes and understand their implications on workforce morale and retention.
