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Business Standard
18 hours ago
- Business
- Business Standard
TCS maintains 100% variable pay for 70% of staff in Q1 despite slowdown
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.
Economic Times
2 days ago
- Business
- Economic Times
Wage hikes a priority for TCS; focus on growth with profitability: CFO
Agencies Delivering wage hikes for its over 6 lakh employees is a "priority" for TCS, the country's largest IT services company's Chief Financial Officer (CFO) Samir Seksaria has said. Speaking to PTI, after the release of the June quarter results, where the business witnessed headwinds on growth and margins, Seksaria made it clear that TCS will focus on growth with profitability. The company showed a 6 per cent increase in net on non-core income as demand got impacted due to macroeconomic and geopolitical troubles, and deferred its annual wage hikes that typically set in from April. Stating that TCS has rarely resorted to deferring wage hikes unlike peers, Seksaria said, "My priority is getting back to the wage hike." He, however, did not specify when the hikes will be delivered. Typically, the annual wage hikes crimp the operating profit margin by over 1.50 per cent, Seksaria said. It reported a 0.20 per cent narrowing in the number at 24.5 per cent for the June quarter, but Seksaria stressed that the intent is to push the margins up into the 26-28 per cent aspirational range. Seksaria explained that investments in upfront hiring to capture demand as it comes in hurt the margins, as lack of demand pulled down utilisation levels. As the company looks to widen the margins, it is grappling with a set of controllable and uncontrollable factors, Seksaria said, pointing out that upping the utilisation and other organisational tweaks are the controllables, while demand is the uncontrollable. "...demand recovery plus optimisation, we have to focus on both. If demand recovery is prolonged, we will double down on optimisation," he said. "Our focus will be growth with profitability. Only profitability without growth doesn't help," he said, adding that this should not be taken as the company giving up on demand. With attrition reaching some bit of concerning levels at 13.8 per cent, Seksaria said the focus will be to retain top talent as it is difficult to build by fresh hiring, and added that some bit of attrition is healthy and it may not take so many measures to retain some part of the talent. Given the fact that the company has capacity now, it may go slow on lateral hiring and restart once demand spurs up. The company does not plan to cut investments but there could be some realignment like building only a part of a structure on a plot, Seksaria said. TCS will not do acquisitions just for expanding the topline, but it will be capabilities that will drive such inorganic moves, Seksaria said, adding that it keeps looking at opportunities in the market. Elevate your knowledge and leadership skills at a cost cheaper than your daily tea. Markets need to see more than profits from Oyo As GenAI puts traditional BPO on life support, survival demands a makeover Is gold always the best bet? Think again Why this one from 'Dirty Dozen', now in Vedanta fold, is again in a mess Can Indian IT protect its high valuation as AI takes centre stage? F&O Radar| Deploy Bull Call Spread in Nifty for gains from volatility amid uptrend Aggressive? Yes, but better for investors with a risk appetite: 6 small private bank stocks with upside potential up to 36% in 1 year In mid-caps, 'just hold' often creates wealth: 10 mid-cap stocks from different sectors with upside potential up to 44%
