India’s largest IT services company, Tata Consultancy Services (TCS), has announced a 100% quarterly variable pay for more than 70% of its employees for the April–June 2025 quarter (Q1FY26), according to a report by The Economic Times. The development marks a positive signal for the IT sector at a time when industry-wide concerns over growth and employee morale remain high.
As per the ET report, the announcement was made through an internal email to employees by Milind Lakkad, Chief Human Resources Officer at TCS, last week. The message confirmed that full payouts would be granted under the Quarterly Variable Allowance (QVA) scheme to a majority of the company’s staff, primarily covering junior roles.
“All employees up to C2 grade (or equivalent grades) covered under the QVA plan will receive 100 per cent of the Quarterly Variable Allowance,” Lakkad said in the communication, which was reviewed by ET. These grades include trainees, systems engineers, and other early-career professionals.
TCS’s employee grading structure begins with grade Y (trainee), followed by C1 (systems engineer), C2, and ascending levels up to C5 and the executive or CXO tier. The QVA plan is a performance-linked variable component distributed quarterly, commonly tied to both individual and business unit metrics.
Senior staff payouts to vary based on performance
While junior employees are assured the full payout, variable compensation for more senior personnel—those in grade C3 and above—will depend on the performance of their respective business units. These include team leads, mid-management, and senior technical professionals.
“The individual pay-out for the C3 grade and above may vary, depending on business performance,” Lakkad clarified in the internal note.
This differentiated approach reflects a broader trend in the IT industry, where companies are adopting more granular, performance-driven compensation models amid margin pressures and changing demand patterns.
Return to net hiring in Q1FY26
The announcement on variable pay comes close on the heels of TCS’s first-quarter earnings for the 2025–26 financial year, disclosed on 10 July. As part of its Q1FY26 update, the company reported a net addition of over 5,000 employees in the April–June period, reversing a trend of three consecutive quarters of headcount decline.
This uptick brings the company’s total workforce to 6,13,069, underscoring its commitment to ramping up capacity in anticipation of a potential recovery in global IT demand.
“We have honoured all the job offers, and we’ll do so for the rest of the year. Lateral hiring will be recalibrated based on the demand outlook,” Lakkad said during the post-earnings conference call. This suggests a cautious yet forward-looking stance on recruitment, with a focus on balancing hiring needs with macroeconomic trends.
TCS’s decision to ensure full variable pay for a significant share of its workforce also comes at a time when employee expectations, especially at the junior level, are being reshaped by ongoing concerns around automation, role clarity, and future employability.
In the same earnings cycle, the company confirmed that there had been no reduction in headcount due to AI implementation, with the attrition rate stabilising at 13.8% for Q1FY26. This provides further assurance to employees amid global discussions around job displacement due to emerging technologies.
As Indian IT companies navigate a challenging global environment marked by changing client budgets, geopolitical shifts, and rapid tech transformation, signals of workforce investment—such as variable pay disbursement and new hiring—serve as critical indicators of organisational health and intent.
While the broader IT services sector continues to watch for sustained signs of recovery, TCS’s actions this quarter may serve as a bellwether for employee-centric policies aimed at sustaining morale, productivity, and long-term retention.