TCS Defers Wage Hike Citing 'Uncertain' Business Environment

Tata Consultancy Services (TCS), the IT services giant, has deferred the annual wage hike for its over 600,000-strong workforce, citing an "uncertain" business environment. The company typically rolls out these hikes during the first quarter of the financial year.

"Because of the uncertain business environment, we will decide on the wage hike during the year," said Milind Lakkad, TCS Executive Vice President and Chief Human Resources Officer, during the press conference following the announcement of the fourth-quarter results.

Employee Costs Hit Margins

TCS reported modest results for the fourth quarter of FY25. Revenue declined by 0.8% compared to the previous quarter but was up 2.5% year-on-year. The IT giant's profit margins also slipped, with EBIT margin at 24.2%.

TCS said margins were affected by higher employee costs due to promotions and increased spending on sales and marketing.

The management added that revenue was impacted by delays in client spending that began in late February. Despite this, the company won deals worth $12.2 billion during the quarter, up nearly 20% from the previous quarter but down about 8% compared to the same period last year.

Employee Metrics

TCS added 625 employees in Q4 FY25, reversing a decline of 5,300 in the previous quarter. This brings the total headcount to 607,979, up from 607,354.

Attrition in the IT Services segment rose slightly to 13.3%, compared to 13% in the prior quarter. The company also noted a significant shift in its hiring strategy, with digital skill hires now making up 40% of new recruits—up from 17% a year ago. The number of clients contributing over $100 million in revenue remained flat at 64.

CHRO Milind Lakkad said TCS plans to hire about 42,000 freshers from campuses in FY26, the same as last year.

According to Kotak Institutional Equities, the proportion of employees under 30 at TCS is now at its lowest in five years—even lower than during the COVID period.

"Better fresher hiring and concerted efforts to upskill employees will aid pyramid improvement. TCS has exhausted the subcontractor cost lever. Subcontracting costs, as a percentage of revenue, have reached a trough of 4.6% and will no longer contribute to margin improvement. The utilisation rate may offer some upside," the brokerage firm noted.