The variable payout in Q1 was lower than the average quarterly bonuses rolled out in the last two quarters, which were up to 80%, sources said.
On a year-on-year basis, however, this continued to remain on the higher end — up from the 20-40 per cent levels of variable payout given to mid and senior-level employees for nearly two years until Q1FY26.
“My variable pay was deducted by 30-35% this quarter. It’s lower than last quarter. It’s been more than three years since we have received 100% variable pay,” one of the senior employees told Moneycontrol.
While the variable pay cut has affected mid- to senior-level employees, those in the junior bands, who make up the bulk of TCS’ workforce, have continued to receive 100 % of their quarterly bonuses.
TCS didn’t respond to Moneycontrol’s emailed queries at the time of publishing.
TCS starts rolling out its annual wage hikes, which took a hit on its operating margins reported during the quarter. Operating margin for Q1 was 24%, declining 130 bps sequentially.
“In Q1, we rolled out annual increments for our global workforce, which impacted margins by 170 bps. We strengthened our partnership ecosystem and made targeted investments, which we were able to partly offset with 40 bps of currency benefit and operational efficiencies,” Samir Seksaria, CFO, TCS had said at the company’s earnings conference in July.
“As we have demonstrated in the past, our approach is to not optimise margins in isolation, but to invest in capabilities that strengthen our long-term competitiveness while continuing to deliver industry-leading profitability and return ratios,” Seksaria added, reiterating the IT services behemoth’s priority to reinvest gains into building long-term AI-led capabilities.
This comes at a time when the IT services industry is grappling with a challenging demand environment and AI deflationary pressures affecting revenue growth visibility.
Meanwhile, rival Infosys too slashed its average variable pay to 70% for Q1, down from the 80% it paid during the same period last fiscal year.
Variable pay linked to attendance
At TCS, variable pay has also been linked to an employee’s office attendance. Unlike its peers that allow some hybrid work options, TCS has a five-day work-from-office policy.
Since Q1FY25, the company has closely linked mandatory work-from-office requirements to eligibility for receiving quarterly variable allowance (QVA). Employees with less than 60% office attendance are not eligible for the quarterly bonus.
As per the policy, TCS expects a minimum 85% attendance of employees in the office for them to be eligible to get full quarterly variable pay. Employees with 75-85% work from office attendance receive up to 75% of their variable pay, while those with 60-75% attendance will only get 50% of their variable pay.
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