TCS maintains 100% variable pay for 70% of staff in Q1 despite slowdown

Business Standard

2 days ago

Tata Consultancy Services (TCS), India's largest IT services company, has announced a 100 per cent payout of the Quarterly Variable Allowance (QVA) to over 70 per cent of its employees for the April–June quarter (Q1 FY26), according to an internal mail viewed by The Economic Times.
This marks the second consecutive quarter of full QVA disbursement to the majority of its workforce, even as the industry continues to battle global macroeconomic headwinds and tight client budgets.
The company stated that the payout for employees in higher grades, typically managerial and leadership roles, would remain variable and aligned with the performance of their respective business units, a policy it has followed consistently across quarters.
'We have paid out 100 per cent QVA to over 70 per cent of the company. For all other grades, the QVA depends on their unit's business performance. This is in line with our standard practice across quarters,' TCS had said in a statement issued previously in May, when it also made a full QVA payout for the January-March quarter.
The company's internal grading structure begins with Y-level trainees, followed by system engineers (C1), and ascends through C2, C3, C4, C5, and executive leadership levels. Staff in the C3 and above bands generally comprise senior managers and business unit heads.
Growth slows, but headcount grows
Despite its commitment to employee payouts, TCS reported a mixed financial performance in Q1 FY26. Net profit rose 6 per cent year-on-year to ₹12,760 crore, up from ₹12,040 crore in the same period a year ago. However, revenue grew just 1.3 per cent year-on-year to ₹63,437 crore. In constant currency terms, revenue declined 3.1 per cent, and sequentially, revenue was down 1.6 per cent — the slowest growth since the Covid-hit Q1 FY21.
The company cited global macroeconomic uncertainty, geopolitical tensions, and sluggish discretionary tech spending as ongoing drags on demand. CEO K Krithivasan noted that a recovery in discretionary investments remained elusive. 'This trend has continued and intensified to some extent in this quarter,' he said during the earnings call.
Despite the subdued business environment, TCS added 5,060 employees during the April-June quarter, building on the 625 net additions made in the January-March period. The company's workforce now stands at nearly 613,000 — the highest among Indian IT firms. Attrition for the quarter stood at 13.8 per cent.
No word yet on annual increments
While the firm has honoured its quarterly variable pay commitment for two straight quarters, it has yet to announce annual salary hikes.
Speaking after the Q1 results, Chief Financial Officer Samir Seksaria said delivering annual wage hikes remains a top priority for the company, despite the deferment. 'My priority is getting back to the wage hike,' Seksaria told PTI, though no timeline was specified.
TCS typically rolls out annual increments starting in April. Seksaria noted that wage hikes, while critical, usually dent operating margins by over 150 basis points. He also pointed to a decline in utilisation levels due to upfront hiring, even as demand has remained weak.
'As demand recovers, we expect utilisation to improve. If demand recovery is prolonged, we will double down on optimisation,' he said, adding that internal efficiencies will be key to margin management going forward.