TCS Cuts Q1 Variable Pay For Mid, Senior Staff Amid Margin Pressure

Tata Consultancy Services (TCS) has paid an average 60-70% of quarterly variable pay to employees in mid and senior-level bands for the April-June quarter.

Moneycontrol reported the development stating that the move comes as the IT services company faced margin pressure while continuing to invest in artificial intelligence (AI).

The payout was below the average of up to 80% given in the previous two quarters. However, it remained significantly higher than the 20-40% levels paid to mid and senior-level employees for nearly two years through Q1 FY26, the report said.

Junior Employees Get Full Payout

The reduction has primarily affected mid and senior-level employees, while workers in junior bands have continued to receive 100% of their quarterly bonuses, Moneycontrol reported.

The April-June period also coincides with TCS' annual salary revision cycle. The company said wage increases for its global workforce affected profitability during the quarter. TCS reported an operating margin of 24% in Q1, down 130 basis points sequentially.

TCS Chief Financial Officer (CFO) Samir Seksaria said at the company's July earnings conference that annual increments had affected margins by 170 basis points.

The company partly offset the impact through currency gains and operational efficiencies, while also making investments in its partnership ecosystem.

"In Q1, we rolled out annual increments for our global workforce, which impacted margins by 170 bps. We strengthened our partnership ecosystem and made targeted investments, which we were able to partly offset with 40 bps of currency benefit and operational efficiencies," Seksaria said at the earnings, as per Moneycontrol.

Office Attendance Linked To Pay

Moneycontrol also reported that TCS links quarterly variable pay to office attendance.

Employees with less than 60% attendance are ineligible for the payout, while those recording 60-75% attendance receive 50% and employees with 75-85% attendance can receive up to 75%. Full variable pay requires at least 85% office attendance, the report said.

The development comes as the IT services sector faces subdued demand and concerns over AI-led pressure on revenue growth. Rival Infosys also reduced its average Q1 variable payout to 70%, from 80% a year earlier, the report added.