Summary
Tata Consultancy Services (TCS), India’s largest information technology services provider with a workforce exceeding 600,000 employees worldwide, has recently adopted a cautious and performance-driven approach toward salary increments amid global economic uncertainties. In response to volatile market conditions, TCS’s leadership, led by Chief Human Resources Officer Milind Lakkad, has indicated that the timing and scale of salary hikes for fiscal year 2024-25 will be determined progressively rather than following the traditional annual schedule. This strategy reflects a shift toward aligning employee compensation with evolving business performance and compliance with internal policies, such as the return-to-office (RTO) mandate introduced in early 2024.
For FY 2024-25, TCS announced base salary increases ranging from 4.5% to 7% for most employees, with exceptional performers eligible for double-digit raises up to 15%. The company also continues to offer quarterly variable payouts tied to individual and organizational performance, with approximately 70% of employees receiving full variable pay in recent quarters. However, initial salary hikes planned for April 2025 faced postponements due to macroeconomic challenges, including global trade tensions and tariff uncertainties. Despite these pressures, TCS has maintained aggressive hiring plans, targeting over 40,000 fresh graduates to support long-term growth.
TCS’s cautious compensation approach mirrors broader trends in the Indian IT sector, where firms like Infosys have also implemented performance-based, flexible pay structures amid uncertain demand and geopolitical challenges. The company’s emphasis on physical office presence as a factor in compensation decisions has generated mixed employee reactions, with some expressing concerns about morale and retention while others acknowledge the rationale behind differentiated pay hikes and attendance-linked bonuses.
Overall, TCS’s salary raise strategy during this period highlights the firm’s attempt to balance fiscal prudence with talent retention and motivation in a challenging economic landscape. Its adaptive compensation policies, ongoing investment in fresh talent, and linkage of pay to performance and workplace compliance underscore TCS’s efforts to sustain competitiveness while navigating a complex global environment.
Background
Tata Consultancy Services (TCS), India’s largest IT services provider with a workforce exceeding 600,000 employees across 46 countries, has been closely monitoring the uncertain business environment to determine its approach toward employee compensation and salary increments. During the Q4 FY25 earnings press conference in Mumbai, Milind Lakkad, the Chief Human Resources Officer (CHRO) of TCS, addressed concerns regarding salary hikes and stated that the company plans to review the situation later in the financial year before deciding on the timing and scale of salary increments. This cautious approach contrasts with the traditional practice of annual raises, as TCS aims to align compensation adjustments with evolving market conditions and business performance.
In April 2025, TCS announced a 20% salary increase for eligible employees, while others, particularly those in the B-band, are expected to receive performance-based raises averaging around 4%. Moreover, TCS continues to offer variable payouts quarterly, with employees set to receive their full eligible amounts in Q4 FY25, ensuring continued performance-linked compensation. This strategy reflects TCS’s effort to balance employee retention and motivation with fiscal prudence amid a fluctuating economic landscape.
Comparatively, other major IT firms in India, such as Infosys, have also been managing salary revisions cautiously. Infosys has communicated plans to issue annual compensation revision letters by the end of March 2025, with expected salary hikes ranging from 5 to 8 percent based on delivery unit recommendations. This indicates a broader trend among Indian IT giants to adopt flexible and performance-driven compensation models in response to prevailing market uncertainties.
Salary Raise Announcements for FY 2024-25
Tata Consultancy Services (TCS) announced its annual salary hikes for the fiscal year 2024-25, with increases ranging from 4.5% to 7%, depending on individual employee performance. Exceptional performers are expected to receive double-digit increments as part of the company’s compensation strategy. This hike marks one of the lowest increments in the past four years, with the overall salary raise band falling between 4% and 8% for FY2024-25.
A key factor influencing the salary increments is employees’ compliance with TCS’s return-to-office (RTO) policy, which was enforced in early 2024. Employees adhering to the RTO mandate are more likely to benefit from higher salary increases and variable payouts, highlighting the company’s emphasis on physical presence at work locations as part of its performance assessment criteria. Moreover, TCS has linked performance bonuses to seat availability at physical office locations, requiring approvals for exceptions through its internal portal, Ultimatix.
Initially, the salary increase that was expected to begin in April 2025 was postponed due to concerns over global economic uncertainties and tariff-related issues raised by US President Donald Trump. Despite these challenges, TCS has maintained a commitment to rewarding employee performance, alongside its ambitious hiring plans, including recruiting 40,000 freshers in FY24, to support its growth trajectory.
Factors Influencing Salary Raise Decisions
Tata Consultancy Services (TCS) has adopted a cautious stance regarding salary hikes amid prevailing global economic uncertainties. The company’s Chief Human Resources Officer, Milind Lakkad, emphasized that the timing of wage increases will be decided throughout the year as market conditions become clearer. This approach is not characterized as a delay but as a prudent response to ongoing business challenges, including geo-political tensions and economic instability.
Several key factors contribute to TCS’s decision to postpone immediate salary hikes. Firstly, the global macro-economic environment remains volatile, impacted by trade wars and tariff surges, notably those involving the United States. Such uncertainties have led to muted growth expectations and a contraction in demand, compelling the company to prioritize financial caution. Additionally, the company’s net profit has seen mixed results, with a slight decline in the latest quarter despite revenue growth, underscoring the need for measured financial management.
Despite freezing base salary increments temporarily, TCS continues to reward employees through quarterly variable pay, with 70% of employees receiving full eligible variable compensation for the recent quarter. This indicates a focus on performance-linked rewards while managing fixed costs prudently. Furthermore, the company maintains its commitment to hiring, planning to onboard 46,000 freshers, which reflects an investment in long-term growth and talent retention despite current economic headwinds.
Internal operational factors also play a role in compensation decisions. For instance, seat availability at physical office locations influences performance bonus calculations, and exceptions require formal approvals through internal portals. Moreover, TCS aims to offset the impact of salary increases through enhanced efficiencies, as noted by its CFO, who highlighted that operating margins accounted for the cost of recent raises balanced by improved productivity.
Distribution of Salary Raises Across Employee Levels
Tata Consultancy Services (TCS) has structured its salary increments to reflect performance and employee levels, with varying raise percentages across the workforce. For the fiscal year 2025-26, the company announced salary increases generally ranging from 4.5% to 7%, targeting most employees, while top performers are eligible for higher increments of up to 10-15% based on their contributions. This approach emphasizes rewarding merit and aligning compensation with individual performance metrics.
Entry-level employees and freshers typically receive average salary hikes of about 6-8% after their first year, which is slightly above the general range for regular increments, reflecting TCS’s commitment to nurturing new talent. In contrast, outstanding performers across all levels can expect double-digit raises, often between 12% and 15%, which serve as significant incentives for maintaining high productivity and innovation within the company.
Additionally, TCS maintains a system of quarterly variable payouts that complement the base salary increases. Approximately 70% of employees receive their full variable pay each quarter, which is performance-driven and varies according to both individual and business results. This variable component further differentiates total compensation based on employee contributions irrespective of base salary increments.
Timeline and Evolution of the Salary Raise Process
Tata Consultancy Services (TCS) traditionally implements its annual salary increments beginning in April, extending through the first half of the fiscal year. This cycle aligns with the company’s policy of announcing pay hikes during the first quarter, which allows adjustments to be reflected early in the financial year.
In the fiscal year 2024, TCS reportedly provided salary increments largely ranging from 6% to 9%, with high-performing employees receiving more substantial raises between 12% and 15%. Despite the scheduled timing, the salary hike process for 2024 experienced delays and was under close scrutiny, particularly for promotions at higher levels, due to cost containment measures. These constraints led to uncertainty around the exact timing of increments, with company officials indicating that decisions on wage hikes would be made during the year.
While the annual salary increases faced postponement, TCS maintained its commitment to variable pay disbursement. For instance, in the fourth quarter of the fiscal year, approximately 70% of employees received their full eligible variable pay, ensuring continued performance-linked rewards despite the delay in fixed pay revisions.
Looking ahead, projections suggest that for the fiscal year 2025-26, TCS may implement average salary hikes in the range of 7-8%, continuing the trend of moderate increases while addressing economic and organizational factors. This evolving approach to the salary raise process reflects a balance between employee rewards and fiscal prudence within the company’s compensation strategy.
Comparison with Other Indian IT Companies
Tata Consultancy Services (TCS), as India’s largest IT services provider, has recently outlined its approach to salary increments amidst a cautious economic environment. While TCS plans to hire 42,000 freshers and has maintained a consistent practice of annual increments with top performers receiving double-digit hikes, the company has indicated that the timing of wage hikes will be decided during the fiscal year, with some delays expected in the promotion process.
In comparison, Infosys, ranked second among Indian IT firms, has adopted a more defined stance on salary revisions. Infosys employees are expected to receive their annual compensation revision letters by the end of March 2025, with salary hikes projected in the range of 5 to 8 percent based on delivery unit recommendations. This suggests a somewhat more concrete approach to increments compared to TCS’s flexible timing.
Other major Indian IT companies such as Wipro, Tech Mahindra, and HCL Technologies also remain under close observation for their salary hike trends, which often serve as indicators of broader industry compensation sentiments. Notably, HCL Technologies continues to lead in executive compensation, with a significant portion of pay coming from variable incentives and shares exercised, highlighting a varied compensation structure within the sector.
Official Statements and Communication from TCS Leadership
Tata Consultancy Services (TCS) has maintained a cautious stance regarding the details of its salary hikes amidst a challenging global economic environment. The company’s Chief Human Resources Officer, Milind Lakkad, confirmed the continuation of annual increments, emphasizing that exceptional performers would receive double-digit salary increases. However, he refrained from disclosing specific figures or a comprehensive breakdown of the salary revisions.
In April 2024, TCS officially announced planned annual salary hikes ranging from 4.5% to 7%, contingent on individual employee performance. This move reflects the company’s commitment to rewarding merit and maintaining competitive compensation standards in the industry. Alongside salary increments, TCS also highlighted its intention to recruit 40,000 fresh graduates in the fiscal year 2024, signaling ongoing investment in talent acquisition despite economic uncertainties.
While there has been speculation and some employee concerns regarding the impact of salary adjustments on morale and retention, TCS has not issued any communication validating rumors of delayed hikes. The company reported a net profit of Rs 10,431 crore for the quarter, surpassing the Rs 10,000 crore mark for the first time, underscoring its financial stability.
TCS leadership has linked salary increments and variable payouts with employee adherence to the company’s return-to-office (RTO) policy initiated in early 2024. Employees who complied with this mandate are reportedly more likely to benefit from higher increments, reflecting the firm’s strategic emphasis on hybrid work model compliance.
Despite concerns related to global economic conditions and tariff issues raised by international developments, including remarks from US leadership, TCS continues to prioritize promotions and career growth opportunities. However, it has postponed the initial April 2025 salary hikes as part of a measured response to the external economic environment.
Employee Response and Organizational Impact
TCS’s announcement of performance-based salary increments has generated a range of responses among its employees. While the company has maintained an average hike expectation between 4-8%, with top performers receiving increments as high as 12-15%, this shift towards differentiated pay is intended to incentivize productivity and innovation within the workforce. The average compensation increase in FY 2021-22 was reported to be approximately 12-14%, with new employees typically receiving 6-8% hikes after their first year.
However, the announcement has elicited mixed reactions. Some employees have expressed understanding of the economic challenges prompting the company’s approach, recognizing the need for a more performance-driven reward system. Conversely, others have voiced concerns about potential negative impacts on morale and employee retention, fearing that a steep differentiation in pay hikes might create disparities and dissatisfaction within the workforce.
In addition to performance-based increments, TCS has also introduced attendance-based criteria for bonuses. An internal memo stipulated that employees with less than 60% attendance or those attending office fewer than three days per week are ineligible for performance bonuses. This policy underscores TCS’s emphasis on workplace presence as a factor in reward eligibility, potentially impacting employee engagement and attendance behaviors.
Equity and Diversity Considerations
Tata Consultancy Services (TCS) places significant emphasis on leveraging India’s diverse talent pool to meet the evolving skill requirements in the global IT industry. According to Milind Lakkad, TCS’s Chief Human Resources Officer (CHRO), India’s attractiveness as a talent hub is driven by the country’s ability to provide niche skills that are critical for addressing client expectations amid geopolitical challenges affecting other regions. This approach reflects TCS’s commitment to expanding talent sourcing beyond traditional centers to maintain agility and global competitiveness.
In terms of workforce categorization, TCS employs a structured grading system that ranges from trainee levels (Y) to senior leadership positions (CXOs). Employees classified as C3B and above—considered senior-level staff—have experienced differentiated compensation practices, including receiving lower percentages of variable pay during recent quarters. This nuanced approach to pay adjustments indicates TCS’s attempt to balance equity across various employee levels while navigating economic uncertainties.
The company’s focus on diversity extends beyond geography and skill sets to include equitable treatment of employees across grades, even during challenging periods such as the postponement of salary hikes in 2025. While the annual wage increase has been deferred due to global economic concerns, TCS continues to distribute quarterly variable pay to a majority of employees, with 70% receiving their full eligible amount in the fourth quarter. This strategy helps sustain employee morale and retention, especially in a diverse workforce where individual expectations and career stages vary widely.
Future Outlook and Projections
TCS has adopted a cautious stance regarding salary increments amid uncertain market conditions and global economic challenges. The company plans to monitor the evolving business environment closely and determine the timing of wage hikes during the financial year rather than adhering to the traditional April schedule. While the annual salary hike has been postponed, TCS will continue to disburse quarterly variable pay, with 70% of employees receiving their full eligible variable payout for the fourth quarter.
Looking ahead, TCS is expected to implement annual salary increases starting from April 2025 for the fiscal year 2025-26, with hikes potentially reaching up to 8%. This projection reflects the company’s intent to balance competitive compensation with the need to navigate prevailing economic headwinds and sectoral challenges. The IT industry is experiencing reduced demand for conventional services, intensified competition, and increased investment requirements in
The content is provided by Avery Redwood, Fact-Nest
