Introduction

Tata Consultancy Services (TCS), India’s largest IT services company, has announced a significant shift in its workforce strategy for 2025. The company plans to freeze the hiring of experienced professionals and pause annual salary increases globally, impacting its workforce of over 600,000 employees. This move comes on the heels of TCS’s decision to lay off approximately 12,000 employees, or 2% of its global workforce, as it navigates economic uncertainties and the growing influence of artificial intelligence (AI) in the IT sector. In this article, we explore the reasons behind these decisions, their implications for employees and the industry, and what it means for the future of IT jobs in India and beyond.

Why TCS Is Freezing Hiring and Pausing Salary Hikes

TCS’s decision to halt lateral hiring and suspend salary increments is driven by a combination of macroeconomic challenges and industry-specific pressures. According to an internal email reviewed by The Economic Times, the company cited ongoing geopolitical tensions and macroeconomic uncertainties as key factors impacting its Q1 FY26 results. These challenges have led to cautious client behavior, prompting TCS to adopt a prudent approach to cost management.

The rise of AI-driven technologies is another significant factor. As clients increasingly demand AI-centric solutions and cost-efficient delivery, TCS is realigning its workforce to focus on AI deployment, technology investments, and market expansion. This shift has resulted in a stricter policy for benched employees, who must now find billable projects within 35 days or face termination. Onboarding delays for experienced hires have also extended beyond 65 days, reflecting TCS’s cautious approach to workforce expansion.

Impact on TCS Employees

The freeze on hiring experienced personnel and the pause on salary hikes are creating ripples of uncertainty among TCS’s workforce. Employees, particularly those at mid and senior levels, face increased pressure to secure billable projects or risk being phased out. The company has already begun releasing benched staff in cities like Hyderabad, Pune, Chennai, and Kolkata, aligning with its new 35-day redeployment policy.

The employee welfare body NITES has raised concerns, filing complaints with the Indian Labour Ministry over what it calls “illegal layoffs” and onboarding delays affecting 600 experienced hires. These measures have sparked anxiety across the IT sector, with fears that other companies like Infosys, Wipro, and Tech Mahindra may follow suit as they navigate similar challenges.

Despite the challenges, TCS has committed to supporting affected employees with severance benefits, extended insurance coverage, and career transition assistance. CEO K. Krithivasan emphasized that layoffs will be gradual, with a focus on reskilling and redeployment where possible. However, the company acknowledges that some roles, particularly at senior levels, may not be feasible to retain due to skill mismatches or deployment challenges.

Financial and Strategic Implications

The layoffs and hiring freeze are expected to save TCS between $300-400 million (Rs 2,400-3,600 crore) annually, potentially improving margins by 100-150 basis points. However, analysts warn that these measures could lead to execution slippages in the short term and higher attrition in the long run. TCS’s stock has already taken a hit, dropping nearly 30% over the past year, making it one of the weakest performers in the Nifty IT index.

Despite these challenges, TCS remains optimistic about its long-term growth. The company has trained over 550,000 employees in foundational AI and 100,000 in advanced AI, signaling a strategic pivot toward becoming a “future-ready” organization. This includes investments in new technologies, market expansion, and partnerships to strengthen its competitive edge.

What This Means for the IT Industry

TCS’s moves are seen as a “canary in the coal mine” for the IT sector, according to a Jefferies report. As clients prioritize cost-optimization and AI-driven productivity, other IT firms may adopt similar strategies to streamline operations. Companies like Wipro and Tech Mahindra, which rely heavily on consulting-led models, are particularly vulnerable to these pressures. The industry is also grappling with a broader slowdown, with top IT firms reporting only a 1.3% year-on-year revenue growth in Q1 FY26.

The focus on AI and automation is reshaping the traditional IT workforce pyramid. Analysts warn that firms unable to adapt to AI-led models may face a “collapse” of their workforce structures, particularly at the middle and senior levels. This shift underscores the need for continuous reskilling and upskilling to remain competitive in an AI-driven market.

TCS’s Commitment to Freshers

While experienced hiring is on hold, TCS continues to prioritize campus recruitment. The company plans to onboard approximately 42,000 fresh graduates in FY26, maintaining its commitment to nurturing young talent. This strategy not only helps manage costs but also ensures a pipeline of AI-ready professionals trained in emerging technologies.

Conclusion

TCS’s decision to freeze hiring of experienced personnel and pause annual salary increases reflects the broader challenges facing the global IT industry in 2025. Economic uncertainties, coupled with the rapid adoption of AI, are forcing companies to rethink their workforce strategies. While these measures may stabilize TCS’s financial position, they also highlight the need for employees to adapt to an AI-driven future through continuous learning and skill development.

For IT professionals, this is a critical time to focus on upskilling in areas like AI, data science, and cloud computing to remain relevant in a competitive market. As TCS navigates this transformation, its actions may set a precedent for the industry, signaling a shift toward leaner, tech-driven operations. Stay tuned to Bharattone for the latest updates on TCS and the IT sector.

Keywords: TCS hiring freeze, TCS salary hike pause, TCS layoffs 2025, IT industry trends, AI in IT sector, Tata Consultancy Services news, IT job market India

Published: July 29, 2025