Tata Consultancy Services (TCS) has announced a reduction in bonus payouts for some senior employees, with cuts ranging from 20-40% for the July-September quarter. Some employees, reportedly, received no bonus at all. This adjustment aligns with TCS’s updated variable pay policy, which closely ties bonus distribution to both office attendance and business unit performance.
Updated Variable Pay Policy Based on Attendance
In April 2024, TCS implemented a new variable pay policy that incorporates office attendance as a core determinant of bonus eligibility. Under this policy, employees are divided into four attendance-based categories:
- Less than 60% attendance: No variable pay.
- 60-75% attendance: Eligible for 50% of the variable pay.
- 75-85% attendance: Eligible for 75% of the variable pay.
- Above 85% attendance: Eligible for full variable pay.
This updated policy incentivizes employees to return to the office, as TCS aims to maintain a higher in-office presence. As of July, TCS reported that 70% of its workforce had returned to the office, with numbers expected to rise gradually.
Business Performance and Revenue Trends
The decision to reduce bonuses also reflects TCS’s financial performance. The company reported a 5.5% year-on-year revenue growth in constant currency terms for the second quarter. This growth rate, however, is slower than expected and is in line with trends in the broader IT sector. Despite these headwinds, TCS remains optimistic about future growth, forecasting improved business conditions by the fourth quarter.
Impact on Senior Employees
For senior employees, the revised pay policy has introduced a new level of accountability to align attendance with financial incentives. The reduction in bonuses may also indicate an effort by TCS to adjust expenses in response to market challenges. Employees who do not meet the required attendance thresholds risk losing a portion, or all, of their variable pay for the quarter.
Looking Ahead
TCS’s return-to-office policy underscores the company’s commitment to in-office collaboration, which it believes enhances productivity. With anticipated improvements in business performance by Q4, TCS may revisit its approach to variable pay and bonuses. For now, the company’s focus remains on aligning financial rewards with attendance and performance metrics, amid a cautious approach to navigating current market conditions.
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