TCS Grapples with Revenue Headwinds, Slashes Senior Employee Variable Pay
Tata Consultancy Services (TCS), India's largest IT outsourcing firm, has introduced significant changes to its variable pay structure for senior employees, despite maintaining a strict attendance policy. The move comes as the company reported a slower revenue growth in the second quarter (Q2 FY25) of the current financial year, citing headwinds that are expected to stabilize in Q3 and improve in Q4.
The revised policy dictates that employees must work from the office for at least 85% of their scheduled time to be eligible for the maximum variable pay, with any attendance below 60% resulting in no payout. However, despite meeting this requirement, many senior employees received a lower-than-expected payout, ranging from 20-40% of their expected variable pay. This marked a stark contrast to the 70% payout that some employees received in the previous quarter. The disparity in payouts has been linked to varying performance across different business units, with TCS stating that variable pay depends on unit-specific business results.
The development is closely tied to the company's policy update earlier this year, which tied variable pay to office attendance. The move has sparked discontent among employees, who argue that the policy unfairly penalizes those who comply with the company's attendance requirements. TCS had reported a 5.5% year-on-year revenue increase in Q2 FY25, but the growth was impacted by negative demand due to uncertainty. The company is holding out hope that business momentum will pick up in the latter half of the current financial year.
As TCS continues to navigate the current business landscape, it remains to be seen how the revised variable pay structure will affect employee morale and retention rates. While the company's efforts to streamline its operations and adapt to changing market conditions are understandable, the unilateral reduction in variable pay for senior employees may have unintended consequences, particularly those who adhere to the prescribed attendance norms.
