TCS delays pay increments: What's behind the sudden decision?

As we have all heard, Tata Consultancy Services(TCS) will continue to pay variable payouts quarterly and it’s employees will get full eligible amounts in Q4 FY25. This means that employees continue to get some form of compensation increase based on performance. Career growth opportunities are still open for employees as promotions are continuing as scheduled. TCS plans to onboard fresh graduates in FY26, similar to the previous year. It also suggests that the company is still dedicated to talent acquisition and development. However, the company has decided to delay its annual salary hikes for its employees. 

"In the past month, this has resulted in delays in project spending and ramp-ups because tariff delays create uncertainty for clients", said K Krithivasan, Managing Director and CEO.

According to Times of India, TCS plans to hire about 42,000 engineers from campuses, which is similar to the number it committed to and onboarded in 2024–2025 (FY25), in 2025–2026. In Q4, which ended 31 March, the company hired 625 people. For the year, headcount rose by 6,433 after a 13,249 decrease the prior year. It also shows the caution that is gripping the IT services sector as companies pull in their belts. 

What is the reason behind TCS delaying pay increments?

TCS reported a 1.7% decline in net profit for Q4 FY25 as revenue rose 5.3%. This is a mixed financial performance, suggesting that while business is growing, profitability is under pressure. It is believed that clients are taking longer to make decisions and spending less money on new projects because of ongoing trade conflicts and economic problems. This uncertainty is hard for companies like TCS to predict how much money they will earn in the future. Due to this, they have problems deciding whether they need to give their employees salary increases.

TCS delaying pay increments: Is there an economic crisis?

TCS’s decision to delay salary hikes is a sign of caution in the face of economic uncertainty, but it does not mean that there is a full-blown economic crisis.

Global Economic Challenges:

• There are some challenges for the global economy in terms of inflation, trade tensions and slow growth in the major markets. These are, however, not new developments and are part of the ongoing economic fluctuations.

Sector-Specific Caution:

• Being dependent on international clients and projects, the IT sector is very sensitive to the global economic conditions. TCS and other companies are taking steps to control costs and sustain themselves.

However, TCS has not completely ruled out salary hikes, it just wants to defer them until there is clarity on the business environment. This implies that the company is looking forward to growth in the future once the economic conditions are stable.

Will TCS layoff employees?

TCS has not announced any plans for layoffs even though salary hikes are delayed. On the contrary, the company is still hiring, and is expected to hire around 42,000 fresh graduates in FY26.

According to India Today, TCS added 625 people in the fourth quarter, taking its headcount to 607,979.  TCS will continue with its quarterly variable payouts even as fixed salary hikes are on hold. For the fourth quarter, 100% of the variable pay will be paid to 70% of the employees, and the rest will be based on the business performance. ​

Future Outlook

The decision of TCS to delay salary hikes is indicative of the cautious approach the company is taking to deal with the current global economic challenges. Despite this, its ongoing hiring of new employees and its dedication to variable pay suggest that it is more interested in maintaining its long term growth and retaining its employees.

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