Source : INDIA TODAY NEWS
TCS has lowered the quarterly variable payout for employees in its mid and senior job bands for the April-June quarter, people familiar with the matter told Money Control. The move reportedly comes as the IT major faces pressure on operating margins and continues to spend on new technology capabilities, including artificial intelligence (AI).
Employees in these categories received an average of 60-70 per cent of their eligible variable pay during the first quarter, the report said. The figure compares with payouts of as much as 80 per cent in each of the preceding two quarters. The latest payout is still considerably higher than what employees in these bands received during an earlier period of subdued payouts. For almost two years until Q1FY26, the average variable payout for mid and senior-level employees was in the 20-40 per cent range.
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“My variable pay was deducted by 30-35 percent this quarter. It’s lower than last quarter. It’s been more than three years since we have received 100 percent variable pay,” one senior employee told Money Control.
The change comes against the backdrop of a weaker margin performance in TCS’ latest quarter. Its operating margin stood at 24 per cent in Q1, representing a sequential decline of 130 basis points.
The June quarter typically includes the financial impact of annual salary increases. TCS reportedly said the increments announced for its employees globally reduced margins by 170 basis points during the quarter. The company also reportedly increased spending in certain areas and expanded its partner network. Some of the pressure was offset by currency movements and improvements in operational efficiency.
TCS chief financial officer Samir Seksaria said the company was not looking at margins on their own and would continue putting money into areas that could support its longer-term growth.
“As we have demonstrated in the past, our approach is to not optimize margins in isolation, but to invest in capabilities that strengthen our long-term competitiveness while continuing to deliver industry-leading profitability and return ratios,” Seksaria said during the company’s July earnings conference.
The IT industry is currently operating in an uncertain demand environment, with companies also assessing how rapidly AI could change traditional technology services.
For TCS and its peers, investments in AI-related capabilities are becoming an important part of their strategy. However, spending on building these capabilities can add to costs at a time when growth in traditional technology services remains under pressure. India Today Tech has reached out to TCS for a comment and will update it once we get an update.
Infosys has seen a similar reduction in employee payouts. The rival IT company paid an average 70 per cent variable payout for the first quarter, compared with 80 per cent in the same quarter a year earlier. Its payout was unchanged from the preceding quarter.
Office attendance rule
There is another factor that can affect how much quarterly variable pay TCS employees receive – attendance. The company has connected its quarterly variable allowance to office attendance since Q1FY25. TCS follows a five-day work-from-office model, with different payout levels based on the number of days employees spend at the workplace.
Employees maintaining at least 85 per cent attendance qualify for the full variable allowance. Those recording 75-85 per cent attendance can receive up to 75 per cent of the amount, while employees with 60-75 per cent attendance can receive half.
Those below 60 per cent attendance are not eligible for the quarterly allowance.
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SOURCE :- TIMES OF INDIA
