Tata Consultancy Services (TCS), India's largest IT services provider, is set to announce annual salary increases for the financial year 2025, with increments expected to range between 4% and 8%. The salary hike letters are slated to roll out this March, with payouts beginning from April.
According to various sources familiar with the matter, TCS's decision to increase salaries aligns with industry trends, wherein salary hikes at most leading IT firms have gradually slowed down. During the peak COVID-19 period, TCS employees enjoyed double-digit increments, but the subsequent two years have seen pay hikes drop to single digits. For FY24, TCS employees received average hikes of 7-9%, whereas increments reached 10.5% during FY22.
Noteworthy is TCS’s adjustment of salary increments based on employee compliance with its return-to-office (RTO) directive announced earlier this year. An insider revealed, "We have been conveyed the hikes will be around 4-8%. The business verticals which have done well typically get more hikes, but overall increments have not been too good." This reflects the organization's response to changing work dynamics and its emphasis on getting employees back to the office.
While optimism remains high due to new business opportunities, TCS has also spotlighted its variable pay structure. TCS released its quarterly variable pay (QVP) for eligible employees earlier this February, providing full variable payments primarily to junior and mid-level employees. Senior-level staff often received lower variable payouts—ranging from 20% to 40%—indicating the company’s error margin amid economic uncertainty.
The company’s ranking as the largest software services provider positions it uniquely against its peers, particularly Infosys, which is expected to roll out its salary revisions shortly, with amounts projected between 5-8%. Notably, business performance remains influential; employees working within the thriving verticals have been assured of higher increments.
Many employees shared concerns about the stagnation of salary hikes over the past few years. One employee stated, "The hikes have been meagre each year for the past at least three to five years. It has been on the decline since the exit of former chief executive N Chandrasekaran.” His leadership, from 2009 to 2017, coincided with tremendous growth for TCS and the outsourcing sector at large. Following him, Rajesh Gopinathan led the company until May 2023, and K Krithivasan has been at the helm since then.
K Krithivasan expressed some optimism in January this year, stating, "We know currently we are going through a phase where market uncertainty is there,” but emphasized the potential for recovery bolstered by recent contract wins totaling $10.2 billion, marking one of the best third-quarter performances.
The performance improvements are promising, especially with TCS reporting nearly 12% year-on-year growth in consolidated net profit for the December quarter, reaching Rs 12,380 crore. The company also noted steady growth with net sales climbing over 5% year-on-year to Rs 63,973 crore, indicating resilience amid fluctuated market conditions.
Despite these encouraging signs, TCS, like many tech companies, grapples with broader economic concerns impacting the IT sector. The shift from liberal salary increments previously experienced to current more conservative raises indicates the cautious navigation of these economic waters. Various sectors within the IT space have recorded similar declines, prompting many corporations to reassess their compensation structures.
To sum up, TCS's upcoming salary increases for FY25 reflect the company and industry's adaptive response to economic realities, attempting to balance employee support with operational viability. Amid rising profit margins and ambitious hiring targets, TCS appears committed to enhancing its workforce’s financial well-being, albeit with prudent increment strategies.