India’s largest IT services company Tata Consultancy Services (TCS) has slashed down the variable pay for many of its senior employees for the July-September 2024 period (Q2 FY25) reportedly.

The cuts have hit even those who have complied with the company’s work-from-office policy. However, the sources familiar with the development said that negative business demand, driven by uncertainty, was a key factor. 

According to a report, TCS employees received only 20-40 per cent of their expected variable pay, others saw no payout at all. This marks a significant drop from the 70 per cent payout in the previous quarter.

How TCS Pays Variable To Employees

TCS’s variable pay structure takes into account both employees’ in-office attendance and the performance of each business unit. This approach reflects the challenges in market demand and the economic uncertainties impacting Tier-I IT companies, which saw modest growth in Q2. TCS recorded a 5.5% year-on-year revenue increase in Q2 FY25 in constant currency, reaching Rs 64,259 crore, with a net profit of Rs 11,909 crore.

In April 2024, TCS updated its attendance policy, requiring employees to achieve at least 85 per cent office attendance to qualify for their full variable pay. Those with 75-85 per cent attendance receive 75 per cent of the variable pay, while employees with 60-75 per cent attendance receive 50 per cent. Employees attending less than 60 per cent of the time do not qualify for the quarterly bonus.

TCS’s Statement on Variable Pay Reduction

According to a TCS spokesperson, junior employees received their full quarterly variable allowance (QVA), while employees in other grades received variable pay based on their unit’s performance, a standard practice within the company.