TCS layoffs: Tata Consultancy Services (TCS) has decided to stop recruitment of senior staff and freeze yearly salary increments across its global operations. This decision follows the company’s recent announcement to reduce its over 6 lakh workforce by 2% – which is around 12,000 people who will be laid off.The mass sackings by TCS have heightened concerns within the IT sector, which is currently facing reduced demand and potential job losses due to artificial intelligence advancements. Industry analysts suggest that other companies facing similar challenges might follow TCS’s approach.Sources told ET that the waiting period for experienced new hires to join has extended beyond 65 days. TCS has begun removing numerous inactive employees across its offices in Hyderabad, Pune, Chennai and Kolkata, implementing its new directive that requires unassigned staff to secure projects within 35 days or leave.Also Read | ‘Halt all terminations…’: TCS layoffs prompt NITES to write to Labour Minister; IT employee union wants stay on 12,000 job losses
TCS Cost Cutting Exercise
TCS communicated to its employees through an internal email on Saturday regarding challenges from market and economic uncertainties.“As far as FY26 is concerned, on the global front, TCS Q1FY26 results have been impacted by ongoing political tensions and macroeconomic uncertainties,” said the email, which ET has reviewed. “In response, the company has made the difficult decision to put a pause on annual salary increases globally–a decision aimed at ensuring long-term stability and sustainability of the organisation. While the outlook remains positive with a robust pipeline, we have observed similar cautious behaviour among our customers, which warrants our prudence.”A mid-level employee informed the financial daily that team leaders have implemented restrictions on nearly all external recruitment.“There is a huge operational cost cutting in place, we have been told.”Also Read | TCS layoffs ‘biggest ever’ for Indian IT! Artificial Intelligence not to blame for ‘difficult’ decision? Top 10 things to know about mass sackings
TCS Layoffs: The Ripple Effect
The workforce reduction strategy by TCS has emerged as a significant discussion point in corporate leadership meetings, according to a senior executive.“The issue’s scale is particularly significant for TCS due to its organisational dimensions and framework,” the executive said. “However, certain companies recognised the AI transformation earlier and made timely investments. We’ve observed quiet workforce adjustments for approximately six months. The extent of TCS’s potential staff reduction remains uncertain at present.”Investment firm Jefferies indicated this could signal broader implications for the IT services industry.“TCS’ move to cut 2% of its workforce may lead to execution slippages in the near term and higher attrition in the longer-run for the firm and reflects a weak demand environment for the sector,” the report said. “With most deal wins being led by cost-optimisation initiatives and involving AI-led productivity pass-through, IT firms unable to gain share may have to resort to layoffs.”Industry analysts suggest the IT sector faces additional challenges, particularly for consulting-focused organisations like Wipro and Tech Mahindra, as they contend with reduced business activity whilst struggling to maintain adequate employee skill development amidst AI-driven changes.Also Read | ‘Don’t resign under pressure….’: TCS layoffs opposed by IT employee unions; IT giant to sack 12,000 employees
TCS Layoffs: Employee Unions Protest
The IT employees’ welfare organisation NITES has submitted its third letter to the labour ministry on Monday regarding “illegal layoffs” at TCS. Their previous communications addressed concerns about bench policy and delays in onboarding 600 experienced professionals.HFS group’s CEO and chief analyst Phil Fersht was quoted as saying, “TCS has the biggest bloat around the middle compared to its peers. Most others have been gradually trimming the middle for years now but it’s clear that TCS can’t afford that extra weight any more. This is more of a warning sign to get their people to step it up and a smart move to show they are shedding their stuffy image.”
TCS Performance Underwhelming
The company’s financial performance has been underwhelming, with TCS shares declining by nearly 30% over the past year, positioning it amongst the bottom three performers in the IT index. In comparison, the share price drops were less severe for other firms: Infosys at 19%, HCLTech at 10%, and Wipro at 4.6%.A senior IT analyst, speaking anonymously, noted: “Given the layoffs are at mid and senior level, a back-of-the-envelope calculation estimates savings of $300-400 million (Rs 2,400-3,600 crore) a year. However, the TCS CEO said it will be done gradually.”An additional IT sector analyst suggested these measures could result in margin improvements of 100-150 basis points, although TCS might reinvest a portion of these savings.Also Read | TCS layoffs: What will Tata Consultancy Services do for 12,000 employees it will let go this year? What the IT giant said
