Tata Consultancy Services has said no employee has faced a reduction in gross or net salary following its latest appraisal cycle, responding to growing employee concerns over revised compensation letters, gratuity exclusions and changes linked to India’s upcoming labour codes.
The clarification came after employees raised questions about lower cost-to-company (CTC) figures, downgraded performance bands and changes to take-home salary structures following the company’s annual salary revision exercise.
The debate centres on the exclusion of gratuity from CTC calculations under TCS’ revised compensation framework.
“T here has been no reduction in employees’ gross pay or net pay,” a TCS spokesperson told The Times of India.
Gratuity calculations revised under labour code changes
TCS said the revised salary structure was designed around three objectives:
• Compliance with India’s new Labour Codes
• Standardisation of wage structures across its India workforce
• Protection of employee take-home salaries while retaining tax efficiency flexibility
The company explained that gratuity calculations are now being aligned with provisions under the Code on Social Security, 2020, which links gratuity to broader wage definitions rather than only basic salary.
According to documents reviewed by The Times of India, the revised wage structure classifies the following as part of wages:
• Basic pay
• City allowance
• Personal allowance
At the same time, several components are treated as exclusions under the new structure, including:
• House rent allowance (HRA)
• Conveyance allowance
• Provident fund contributions
• Superannuation and NPS contributions
• Statutory bonus
The company also clarified that performance-linked variable pay, company-paid health insurance premiums, ESIC contributions and other incentive-linked payments are treated separately and are not counted as wages.
Employees question changes in appraisal letters
The clarification follows employee complaints around revised appraisal letters issued during the FY26 salary increment cycle.
Some workers had questioned why gratuity no longer appeared within overall CTC calculations and whether the revised structure effectively reduced compensation.
Some staff also alleged that monthly payouts had declined after variable pay adjustments and restructuring of compensation components.
TCS maintained that employees comparing compensation across years should remove gratuity from previous CTC calculations to make a “like-for-like” comparison.
The company said gratuity accruals themselves had actually increased under the revised framework because the calculation is now linked to wages rather than only basic salary.
“Employees will see higher gratuity accruals reflected in their payslips,” the spokesperson told The Times of India.
TCS added that gratuity payouts would continue under either:
• The existing TCS Gratuity Scheme
• The Social Security Code framework
The company said employees would receive whichever option offers the greater benefit.
The gratuity multiplier, according to the report, will depend on employee tenure as of July 1 this year. TCS also noted that some employees may not see a change if the earlier company scheme remains more favourable.
Salary hikes continue despite compensation concerns
TCS rolled out average salary hikes of around 5% during the latest appraisal cycle, with increments varying according to performance bands.
According to The Times of India:
• Employees in the A+ category received hikes between 9% and 12%
• Employees in the A category received increases ranging from 5% to 8%
The company remains India’s largest IT services employer and has traditionally positioned itself as one of the sector’s more stable employers during periods of global technology slowdown.
However, employee scrutiny around compensation structures has intensified as IT companies increasingly adjust pay frameworks, variable compensation and workplace policies in response to cost pressures and regulatory changes.
Variable pay remains tied to office attendance
Internal compensation documents reviewed by The Times of India also showed that performance-linked payouts remain connected to work-from-office compliance and deployment metrics.
Under the policy:
• Employees with WFO compliance of 85% or higher receive 100% performance pay
• Payouts reduce progressively with lower compliance levels
• Employees below 25% compliance receive no variable payout
The policy also applies deployment metrics sequentially after accounting for office attendance compliance.
When asked about the linkage, the TCS spokesperson told the publication that work-from-office attendance “is still linked to the variable pay component with some rationalisation that is beneficial for employees”.
Labour code transition reshapes compensation structures
The controversy highlights how India’s incoming labour code reforms are beginning to reshape compensation structures across major employers.
Several companies have been revisiting wage definitions, gratuity structures and salary components to align with the Code on Social Security framework, which broadens the definition of wages for statutory calculations.
TCS had earlier disclosed that it set aside ₹2,128 crore as a one-time expense to align compensation structures with the new requirements.
For employees, however, the transition has created fresh confusion around how salary revisions, variable pay and long-term benefits should be interpreted under the updated framework.