TCS Announces Salary Increases Amid Changes

Tata Consultancy Services (TCS), India’s largest IT services provider, is set to implement annual salary increases for the fiscal year 2025. These increments will take effect in March, with disbursements beginning in April. According to sources familiar with the matter, the expected salary hikes will range between 4% and 8%. This decision comes as TCS has linked its increments and variable payments to employee adherence to its newly introduced return-to-office directive.

Salary Increments and Employee Compliance

TCS has made a significant shift in how it determines salary increments. The company has connected these increases to how well employees comply with its return-to-office policy, which was announced in early 2024. An employee shared with ET that the expected hikes would be around 4% to 8%. Historically, TCS has offered higher increments, averaging 7% to 9% in FY24 and 10.5% in FY22. The new approach reflects a growing trend in the IT sector, where companies are increasingly tying compensation to employee performance and adherence to company policies.

The decision to link salary increments to office attendance has raised eyebrows among employees. Many feel that the hikes are not substantial enough, especially when compared to previous years. The company’s performance in various business verticals will also play a role in determining the increments. Employees in sectors that have performed well may receive higher raises, while others may see more modest increases.

Variable Pay Adjustments

In addition to the annual salary increases, TCS recently released its quarterly variable pay for the October-December period. Senior-level employees experienced a reduction in their variable payouts, with some receiving between 20% to 40% less than expected. This reduction has sparked discussions among employees about the company’s compensation strategy.

The IT sector, valued at $254 billion, has seen a decline in annual increments over the past few years. During the high-growth period of the COVID-19 pandemic, many companies offered double-digit salary increases. However, as the industry stabilizes, these figures have dropped to single digits. TCS’s approach reflects this broader trend, as it navigates the challenges of a changing market.

Comparisons with Competitors

TCS is not alone in adjusting its compensation strategy. Infosys, the second-largest IT services provider in India, has also announced that it will distribute annual compensation revision letters before the end of March. The expected increments for Infosys employees are in the range of 5% to 8%, similar to TCS’s projections. This alignment in salary increments among leading IT firms indicates a cautious approach to employee compensation in a fluctuating market.

TCS’s grade hierarchy starts from Y (trainees) and progresses through various levels, including C1 (systems engineers) and C2, C3 – A&B, C4, C5, and CXOs. The senior category typically includes employees at the C3B level and above. With signs of recovery in the business, approximately 70% of TCS staff, particularly those in the C3 category and below, received their full variable pay.

Historical Context and Leadership Changes

The recent changes in TCS’s compensation strategy come in the wake of leadership transitions within the company. Former CEO N Chandrasekaran, who led TCS from 2009 to 2017, oversaw significant growth during a crucial period for the outsourcing industry. His successor, Rajesh Gopinathan, served until May 2023, when K Krithivasan took over the reins. Employees have noted a decline in salary increments over the past few years, attributing this trend to changes in leadership and company strategy.

As TCS navigates these changes, employees remain hopeful for a more favorable compensation structure in the future. The company’s ability to adapt to market conditions while maintaining employee satisfaction will be crucial as it moves forward.

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