Tata Consultancy Services (TCS), India’s largest IT services company, has declared a 100% Quarterly Variable Allowance (QVA) payout for more than 70% of its workforce for the April–June 2025 quarter (Q1 FY26). This marks the second consecutive quarter of full variable pay for the majority of its employees, despite a challenging economic environment and deferred annual salary hikes. The announcement has sparked positive sentiment among employees, though senior staff payouts remain tied to business unit performance.

TCS Maintains Robust Variable Pay Policy

In an internal email, Chief Human Resources Officer Milind Lakkad confirmed that employees up to the C2 grade, including trainees and systems engineers, will receive 100% of their QVA. For senior employees at C3 grade and above, payouts are linked to the performance of their respective business units, aligning with TCS’s standard practice. “We have paid out 100% QVA to over 70% of the company,” TCS stated, emphasizing its commitment to rewarding performance despite a multi-year low in revenue growth.

The decision comes as TCS navigates global macroeconomic headwinds, including tight client budgets and geopolitical uncertainties. The company reported a modest 3.8% year-on-year revenue growth in dollar terms for FY25, with Q1 FY26 facing delays in project starts and discretionary spending. Despite these challenges, TCS’s focus on employee compensation reflects its strategy to maintain morale and retention in a competitive IT sector.

Workforce Growth and Hiring Momentum

TCS bolstered its workforce by adding 5,060 employees in Q1 FY26, bringing its total headcount to approximately 613,000, the highest among Indian IT firms. This follows a net addition of 625 employees in the January–March 2025 quarter, signaling a return to hiring growth after three quarters of decline. The company also onboarded 42,000 freshers in FY25 and plans to maintain or increase this number in FY26, reinforcing its commitment to talent development.

However, attrition remains a concern, with the rate rising to 13.8% in Q1 FY26, slightly above TCS’s comfort range of 11–13%. Chief HR Officer Milind Lakkad noted ongoing efforts to address this, emphasizing investments in training and upskilling to enhance employee engagement.

No Decision Yet on Annual Salary Hikes

While TCS has honored its variable pay commitments, annual salary increments, typically rolled out in April, remain deferred due to economic uncertainties and tariff concerns. Chief Financial Officer Samir Seksaria reiterated that wage hikes are a priority but provided no specific timeline, stating, “We will decide during the year when to make that happen.” This delay has drawn mixed reactions, with some employees expressing concern over stagnant fixed pay amidst rising inflation.

Employee Sentiment and Industry Context

The announcement has been met with cautious optimism among TCS employees, particularly junior staff who benefit most from the full QVA payout. Posts on X reflect a mix of praise and skepticism, with some users noting that the 100% variable pay primarily benefits lower-grade employees earning less than ₹7 lakh per annum, while senior staff face performance-based variability. One X user remarked, “TCS giving 100% variable pay sounds shiny, but revenue growth is stuck at ~3% YoY, and deal wins are slowing.”

In contrast, competitors like Infosys and Wipro have faced criticism for reducing variable payouts, with Infosys averaging 70% for its June 2022 quarter and Wipro suspending payouts for senior staff. TCS’s consistent variable pay strategy positions it as a leader in employee compensation within the Indian IT industry.

What’s Next for TCS?

As TCS prepares for a potential recovery in tech spending, CEO K Krithivasan remains cautiously optimistic, citing expectations of increased discretionary investments once macroeconomic clarity emerges. The company’s focus on hiring, training, and performance-based rewards underscores its long-term strategy to navigate market challenges while retaining talent.

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