- TCS senior employees in C3A grade and above will receive no quarterly variable pay.
- Junior employees will receive 100% of their eligible variable allowance.
- The decision comes as traditional IT services demand remains under pressure despite growth in AI revenue.
Tata Consultancy Services (TCS) is withholding quarterly bonuses from some senior employees after the Indian IT services giant failed to meet its internal performance targets for the September quarter.
An internal memo reviewed by Reuters said employees in the C3A grade and above would receive no quarterly variable allowance (QVA) for the period. The decision marks the first time in at least two years that the company has explicitly withheld all variable pay from this group, according to employees familiar with its compensation practices.
“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,” Chief Human Resources Officer Sudeep Kunnumal said in the memo.
The affected group typically includes employees with around seven to 10 years of experience, extending to senior-level management. Junior employees, meanwhile, will receive 100% of their eligible variable pay.
Why is TCS withholding bonuses from senior staff?
The decision comes as TCS faces pressure on its traditional IT services business, with its latest quarterly results pointing to slower revenue growth.
The company reported its weakest sequential revenue growth for a September quarter in three years, according to Reuters. The figures suggest that demand for conventional technology services remains challenging even as businesses increase spending on artificial intelligence.
Employees told Reuters that TCS typically awards between 50% and 100% of eligible variable pay. The decision to withhold the allowance entirely for some senior staff therefore represents a departure from the recent pattern, although the company has not publicly explained the full performance criteria behind the decision.
Quarterly variable pay is separate from fixed salary. It is linked to performance and can change depending on company, business-unit and individual results. The memo does not say that the affected employees will lose their base salaries.
The decision also highlights how weaker business performance can affect employee compensation even at a major technology company. For experienced workers, variable pay can form a meaningful part of annual earnings, making a full quarterly withholding financially significant.
How is AI growth affecting TCS?
TCS's results present a mixed picture. While traditional IT services demand remains under pressure, the company has reported a nearly 20% increase in AI-related revenue.
Investors welcomed the AI growth, sending TCS shares up as much as 6.2% on Friday, according to Reuters.
The contrast reflects a broader shift in the technology industry. Companies are investing in AI tools and infrastructure, but that spending does not automatically translate into stronger demand across every part of the IT services business.
TCS and its competitors must adapt to changing client budgets, the growing use of AI in software development and business processes, and uncertainty over how customers will distribute technology spending.
India's $315 billion IT sector is also facing immigration-related uncertainty in the United States. The Trump administration announced restrictions affecting major IT outsourcing companies, including TCS, Infosys and HCLTech, in a key green-card program, saying the measures were aimed at addressing fraud and protecting American jobs.
The policy adds another complication for Indian technology companies that rely on the US market and the movement of skilled workers.
For TCS employees, the immediate concern is the loss of quarterly variable pay for senior grades. For the company, the challenge is to turn AI demand into sustained business growth while managing pressure on its traditional services operations.
