Tech Mahindra confirms Q2 salary hikes as margins improve

Tech Mahindra will begin rolling out salary hikes from the second quarter (Q2) of the current financial year in a phased manner, Chief Executive Officer and Managing Director Mohit Joshi has confirmed. 

The announcement comes after the company reported improved operating margins and lower employee attrition for the quarter ended 30 June, even as its workforce continued to shrink.

Speaking during the company's post-earnings conference call, Joshi said employees would receive further communication in the coming days.

"We expect to be able to announce it effective Q2, obviously in a phased fashion." He added: "It will start becoming effective Q2 in a phased fashion."

Operating performance improves despite profit miss

The salary hike announcement followed Tech Mahindra's June quarter results, which fell short of analysts' profit expectations but showed sequential improvement in revenue and profitability. For the quarter, the company reported:

• Consolidated net profit: ₹1,465 crore, up 8.2% sequentially from ₹1,354 crore, but below the Bloomberg consensus estimate of ₹1,607 crore.
• Revenue from operations: ₹15,712 crore, up 4.2% quarter on quarter and broadly in line with analysts' expectation of ₹15,422 crore.
• EBIT: ₹2,264 crore, an increase of 9.2% from ₹2,073 crore.
• Operating margin: 14.4%, improving 70 basis points from 13.7% in the previous quarter and exceeding the Bloomberg estimate of 14.1%.

Employee attrition falls to one-year low

Tech Mahindra also reported an improvement in employee retention during the quarter. The company's annualised attrition rate declined to 11.8%, compared with 12.1% in the March quarter and 12.6% a year earlier, marking its lowest level in a year.

At the same time, overall employee numbers continued to decline. Key workforce metrics included:

• Total workforce: 146,760 employees, down 688 from the previous quarter.
• Core IT workforce: 74,689 employees, down from 75,377 three months earlier.
• Year-on-year reduction in IT workforce: 5,298 employees, from 79,987 to 74,689.

The latest figures also pushed the company's core IT headcount below 75,000 employees for the first time in recent quarters.

Hiring expected to recover as growth strengthens

Despite the lower headcount, Joshi indicated that hiring is expected to resume as business momentum improves.

"We see a good trajectory for revenue growth for the remainder of the year and I assume that that will mean hiring in the remainder of the year," he said during the earnings call. "That should absolutely happen."

AI reshapes workforce planning

Joshi attributed the decline in employee numbers to productivity improvements rather than weaker demand.

According to him, AI-led efficiencies in fixed-price projects have reduced the need to backfill roles, allowing the company to improve productivity while managing workforce requirements more efficiently.

The combination of lower attrition, improving margins and a planned return to salary hikes signals a shift in Tech Mahindra's workforce strategy. While AI continues to influence hiring patterns and operational efficiency, the company expects stronger revenue growth to support recruitment during the remainder of the financial year.