- TCS reduces variable pay for some senior employees, with one reporting a 30-35% deduction this quarter.
- TCS CFO Seksaria defends the company's approach, stating they invest in long-term competitiveness rather than optimizing margins in isolation.
- Infosys has similarly reduced variable payouts to 70% for Q1, down from 80% a year earlier.
- Infosys has linked its quarterly variable allowance to office attendance since Q1FY25.
- The move reportedly comes as pressure on operating margins and continued spending on new technology capabilities, including artificial intelligence (AI), weigh on the company.
- Employees maintaining at least 85% attendance qualify for the full variable allowance at Infosys, while those with 75-85% attendance can receive up to 75% of the amount.
TCS has trimmed variable payouts for mid and senior employees by 30-35% this quarter, reflecting ongoing margin pressures and significant investments in artificial intelligence (AI). According to sources, the average payout has dropped to 60-70% from 80% in previous quarters.5
The company's operating margin fell to 24% in Q1, a decline of 130 basis points. TCS attributed a 170 basis point reduction in margins to global increments announced for employees. A senior employee reported, “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.”
This trend is not isolated to TCS; rival Infosys has also seen a reduction in employee payouts, with an average of 70% for the first quarter, down from 80% a year earlier. TCS's strategy emphasizes long-term competitiveness through investments in technology, as stated by Seksaria during the company's July earnings conference: “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.”23
“A senior employee told Money Control that variable pay was cut by 30-35% this quarter, and it has been over three years since receiving full payout. Rival Infosys also reduced variable payout to 70% for Q1, down from 80% a year earlier, and ties full allowance to at least 85% office attendance.”
