TCS denies quarterly bonuses to senior employees after missing targets

India’s largest IT services company, Tata Consultancy Services (TCS), will not pay quarterly variable bonuses to employees in C3A grade and above after falling short of internal performance targets, according to an internal memo seen by Reuters.

In the memo, Sudeep Kunnumal, Chief Human Resources Officer at TCS, said the company had decided to withhold the quarterly variable allowance (QVA) for the affected employee group this quarter.

“For associates C3A grade and above, there will be no QVA (quarterly variable allowance) this quarter. This decision was taken after careful consideration as our performance for the quarter fell short of internal targets,” Kunnumal said in the memo, as reported by Reuters.

The decision marks the first time in at least two years that TCS has explicitly announced a zero variable-pay payout for some employees.

Who will receive no quarterly variable pay?

The decision applies to employees in C3A grade and above, a group that typically includes professionals with seven to 10 years of experience through senior-level management.

According to the memo cited by Reuters, the payout decision differs by employee grade:

• C3A grade and above: No quarterly variable allowance for the quarter.

• Junior-level employees: 100% of eligible variable pay.

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Employees who spoke to Reuters on condition of anonymity said TCS typically awards between 50% and 100% of variable pay. They described the decision as the first explicit zero-payout announcement for some employees in at least two years.

TCS did not respond to emails seeking comment, Reuters reported.

Performance pressure follows weak quarterly revenue growth

The bonus decision comes after TCS reported its weakest sequential revenue growth for a September quarter in three years, according to Reuters’ report on the company’s latest results.

The company marginally exceeded revenue estimates for the quarter, but the sequential growth figure indicated continued pressure on demand for traditional IT services.

At the same time, AI-related revenue rose nearly 20%. Investors responded positively to the increase, with TCS shares rising as much as 6.2% on Friday, the report said.

The contrasting trends highlight the pressures facing the IT services sector as companies navigate demand conditions while expanding their artificial intelligence businesses.

What the decision means for employees

The withholding of quarterly variable pay affects the earnings employees in the specified grades would ordinarily receive through the performance-linked allowance. The memo attributes the decision to TCS falling short of its internal targets.

The announcement also distinguishes between employee groups, with junior-level staff retaining their full eligible payout while employees in C3A grade and above receive none for the quarter.

TCS’s next performance updates will provide further insight into how the company’s business conditions evolve and whether its variable-pay decisions change in subsequent quarters.