In a move that feels at once cautious and clarifying, Tata Consultancy Services has announced salary hikes for 80 per cent of its workforce, effective September 1, 2025. The delay, of nearly five months, was itself significant. The annual increment, usually due in April, was held back as TCS cited business uncertainty amid weak global demand, inflation, and geopolitical challenges. The hike will now benefit freshers through midlevel staff up to grade C3A, which includes personnel with over a decade of experience.
At the same time, TCS is shrinking its ranks. It plans to cut 2 per cent of its workforce (around 12,000 roles), mostly from middle and senior management (Reuters). The rationale, as framed by CEO K Krithivasan, is skill mismatch and deployment challenges rather than just productivity gains from automation. Yet the broader context is clear: AI and automation are reshaping roles, especially those rooted in repetitive routines and coordination tasks, which could be worrying signs for the broader IT sector.
Adding nuance, TCS’ hiring data tell a more layered story. The company added 5,090 employees in the AprilJune quarter, bringing headcount to around 613,000. Though this is growth on paper, it amounts to less than 1 per cent net addition. That modest uptick, juxtaposed with deeper layoffs, suggests selective hiring, focused likely on AI talent, specialists, or clientaligned roles.
This dual strategy reveals a corporate playbook under transition. TCS is sending signals: invest in junior and midlevel talent, stabilize morale with delayed yet meaningful pay hikes, and discard cost layers that no longer align with the future. The messaging is subtle but potent: traditional hierarchies are giving way to leaner, outcomedriven models.
TCS may be one of the first to make this move, but there are echoes across the IT sector. Analysts warn this could be a canary in the coal mine for other service providers that have yet to grapple with cost pressures, AI disruption and client price sensitivity. The layoffs and delays mark a turning point: the era of hordeandhire pyramid models is ending.
That said, not every peer is mirroring TCS. Infosys, for instance, has chosen a different route. It plans no layoffs and maintains hiring, with emphasis on reskilling and capability centers, projecting stability amid uncertainty. That divergence speaks volumes: Indian IT is splitting between resilience through restructuring, and resilience through reinforcement.
The strategic insight here is less about job cuts or salary dates and more about adaptive design. TCS seems to be betting on a future that rewards agility, specialised expertise, and alignment with AIdriven workflow models.
For employees in fresher and midtier brackets, the delayed hike may feel overdue but welcome. It injects relief and shows commitment. For those in managerial roles, however, the tightening around skills may spur quick reskilling or disruption. The workforce pyramid is shifting toward a diamond, which is to say a larger base of dynamic, entrytomidlevel talent, and a lean summit of highorder expertise.
For the broader Indian IT sector, the implications are deeper. This is a structural inflection backed by economic realism. Global clients are tightening wallets, demanding lower prices, and expecting AIled productivity. Indian firms can’t simply absorb these pressures by scaling up bodies. They must scale up capabilities. If TCS is able to realign itself successfully, the dividend could be stronger margins, sharper talent mix, and smoother client delivery.
But the window to get it right is narrow. Attrition is climbing—TCS’s was at a twoyear high of 13.8 per cent in June. Delayed wage revisions, hiring freezes at senior levels, and elevated uncertainty could spark unrest or talent flight. Proactive leadership and transparent skilling roadmaps will be critical.
In the coming quarters, watch for three signals. First, can TCS reinvest cost savings from layoffs into AI training, project ownership and client innovation? Second, will its attrition stabilise as hikes land and clarity sets in? Third, will other firms mimic or counter TCS’s approach, choosing restructuring over complacency?
India’s IT juggernaut may be jostled, but that jostling may be necessary. If the outcome is cleaner cost structures, smarter talent deployment, and renewed competitive edge in the AI age, then this moment may be remembered not as downturn, but evolution.
