Tata Consultancy Services (TCS) has decided to withhold quarterly variable pay for employees in grade C3A and above after the company fell short of its internal performance targets for the September 2026 quarter. Junior-level employees, however, will receive 100% of their eligible variable pay.
The decision marks a significant change in the IT major’s compensation policy for the affected employees, with reports indicating that it is the first time in at least two years that the company has explicitly withheld the entire quarterly variable payout for this group.
Senior Employees in C3A Grade and Above Affected
According to an internal memo issued by TCS Chief Human Resources Officer Sudeep Kunnumal, employees in the C3A grade and above will not receive their quarterly variable allowance (QVA) for the latest quarter.
The affected category typically includes professionals with around seven to ten years of experience, extending up to senior management positions.
The memo stated that the decision followed careful consideration because the company’s performance during the quarter fell short of internal targets.
Employees told reporters that TCS typically distributes between 50% and 100% of eligible variable pay, depending on performance. The latest decision therefore represents a notable departure from the company’s recent practice.
Junior Employees to Receive 100% of Eligible Variable Pay
While senior employees face a complete withholding of their quarterly variable allowance, junior-level staff will receive their full eligible payout.
The difference in treatment highlights how compensation outcomes can vary across employee grades based on the company’s internal performance and payout policies.
Variable pay forms an important part of employee compensation in the IT services industry, where payouts may depend on individual, business-unit and company-level performance. The latest decision could therefore be a concern for experienced employees who rely on quarterly incentives as part of their overall earnings.
TCS Faces Pressure on Traditional IT Services Growth
The decision comes after TCS reported its weakest sequential revenue growth for a September quarter in three years. The company recorded constant-currency revenue growth of just 0.5% compared with the preceding quarter, reflecting continued pressure on demand for traditional IT services.
At the same time, the company’s artificial intelligence-related revenue increased by nearly 20%. The growth offered a positive signal to investors, and TCS shares reportedly rose by as much as 6.2% on Friday, October 9.
However, stronger AI-related business has not entirely offset the challenges affecting traditional services demand.
What the Decision Means for TCS Employees
The withholding of quarterly variable pay underlines the connection between business performance and employee incentives. For senior staff, the move could affect quarterly earnings, while junior employees will receive their full eligible payouts.
The development also comes as India’s IT sector navigates changing client spending patterns, growing AI adoption and uncertainty around US immigration policies.
Summary
TCS will withhold quarterly variable pay for employees in grade C3A and above after missing internal performance targets for the September 2026 quarter. Junior employees will receive 100% of their eligible payout. The decision comes amid weak sequential revenue growth, even as TCS reported nearly 20% growth in AI-related revenue, highlighting the contrasting trends shaping the company’s business.
