Why TCS is withholding quarterly bonuses of senior employees
What's the story
Tata Consultancy Services (TCS), India's largest IT services company, has decided to withhold quarterly performance bonuses for its senior employees in the C3A grade and above. The decision comes after the company's performance fell short of internal targets in the September quarter. This is the first time in at least two years that TCS has withheld bonuses for some workers, according to an internal memo seen by Reuters.
Memo insights
Decision made after careful consideration: CHRO
The internal memo by Sudeep Kunnumal, TCS's Chief Human Resource Officer, said, "For associates C3A grade and above, there will be no QVA (quarterly variable allowance) this quarter."
He added that the decision was made after careful consideration as the company's performance for the quarter fell short of internal targets.
The grades C3A and above usually include employees with 7-10 years of experience up to senior-level management.
Pay distribution
Junior-level employees to receive full variable compensation
Despite the decision to withhold bonuses, junior-level employees at TCS will still get a full 100% payout of their eligible variable compensation.
This is a departure from the company's usual practice of awarding 50-100% of variable pay.
Employees speaking on the condition of anonymity told Reuters that this is the first time in at least two years that TCS has explicitly said no bonuses shall be awarded.
Financial impact
Weakest sequential September-quarter revenue growth in 3 years
TCS has reported its weakest sequential September-quarter revenue growth in three years, with constant-currency revenue growth of just 0.5%.
However, the company did see a nearly 20% jump in AI-related revenue.
The news of increased AI revenue was welcomed by investors on Friday as TCS's stock rose by as much as 6.2%.