Tata Consultancy Services (TCS) has announced a reduction in the variable pay of its senior staff for the July-September quarter due to a challenging demand environment and economic uncertainties.
This decision comes as the company navigates through a period of slower growth and market volatility.
TCS Variable Pay Reduction Details
TCS has linked the variable pay to office attendance and the performance of individual business units.
While junior-level employees received their full variable pay, senior staff saw a significant reduction.
According to reports, some senior employees received only 20-40% of their expected variable pay, with others receiving no variable pay at all.
This marks a sharp decline from the 70% payout in the previous quarter.
In April 2024, TCS revised its attendance policy, mandating a minimum of 85% office attendance for employees to receive their full variable pay.
Employees with lower attendance rates received a reduced percentage of their variable pay, with those below 60% ineligible for the bonus.
This policy change has been a significant factor in the variable pay cuts for senior staff.
Company’s Response and Justification
A TCS spokesperson clarified that the variable pay for junior grades was paid out at 100% across the company, while for other grades, it depended on their unit’s business performance.
The company emphasized that this approach is in line with its standard practice across quarters.
TCS also mentioned that it expects the headwinds to stabilize in Q3 and return to growth in Q4.
TCS reported a 5.5% year-on-year revenue growth in constant currency terms for the second quarter, reaching Rs 64,259 crore, with a net profit of Rs 11,909 crore.
However, the company has faced challenges in key markets such as the U.S. and Europe, where demand has been weaker than expected.
The economic uncertainties and slower growth have impacted the company’s financial performance and led to the decision to cut variable pay.
The reduction in variable pay for senior staff at TCS reflects the company’s efforts to navigate through a challenging demand environment and economic uncertainties.
While junior employees have been spared from the cuts, senior staff have seen a significant reduction in their variable pay.
TCS remains optimistic about the future, expecting stabilization in Q3 and a return to growth in Q4.
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