Tata Consultancy Services (TCS) will withhold quarterly variable pay for employees at grade C3A and above for the quarter ended September 2026, according to a Reuters report citing an internal company memo. Employees at junior levels will receive 100% of their eligible quarterly variable allowance.
In the memo, TCS Chief Human Resources Officer Sudeep Kunnumal reportedly attributed the decision to the company’s performance falling short of internal expectations.
The affected grades include employees in mid-level and senior positions. Grade C3A typically covers professionals with several years of experience, while higher grades include senior management roles.
According to employees who spoke to Reuters on condition of anonymity, TCS has typically paid between 50% and 100% of eligible variable compensation. They said the decision marks the first time in at least two years that the company has explicitly announced a complete withholding of the quarterly payout for the affected employee group.
The decision comes amid a challenging environment for the traditional IT services sector, where demand conditions and client spending continue to influence business performance. At the same time, TCS is expanding its artificial intelligence (AI) business.
Reuters reported that TCS recorded its weakest sequential revenue growth for a September quarter in three years. However, the company’s annualised AI revenue increased by nearly 20% and crossed $3 billion, according to the report.
TCS had a workforce of 5,98,056 employees at the end of the quarter, highlighting the scale of its operations and the potential reach of compensation-related decisions.
The reported change in variable pay brings employee compensation and performance-linked rewards into focus. For HR teams, such decisions underline the importance of communicating performance expectations, explaining compensation policies and maintaining transparency around variable-pay calculations.
The financial impact on individual employees will depend on their grade, compensation structure and eligibility for other components of pay. TCS has not been quoted here as providing further details beyond the reported internal memo.
The development reflects how performance-linked compensation can change in response to business results, particularly in a sector facing shifts in client demand and investment in emerging technologies.
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