Tata Consultancy Services (TCS), India’s largest private-sector employer, will lay off about 12,200 employees—approximately 2% of its global workforce—by March 2026. This marks the most significant downsizing in the company’s five-decade history. The layoffs will mainly affect mid- and senior-level staff, particularly those with over 10 years of experience.
The impacted employees are largely in non-client-facing roles, such as project managers working in outdated delivery models and specialists in legacy technologies who have not transitioned to high-demand areas like cloud computing, data analytics, or artificial intelligence (AI). The layoffs will be implemented gradually over the next three quarters of the financial year and will not be limited by geography or business domain.
TCS managing director and chief executive officer (MD&CEO) K Krithivasan called it “the toughest decision of my career,” while clarifying that the move is not driven by AI-led productivity gains. “This is not because AI is giving us a 20% productivity boost. It’s about where we see a mismatch in skills or where redeployment has not worked,” he told Moneycontrol in an interview.
In an internal communication dated 27 July 2025, the company explained that it is undergoing a transformation to become ‘future-ready’. This includes investments in next-generation technologies such as AI, data, cybersecurity, cloud, Internet of Things (IoT), and enterprise solutions. The message noted that while reskilling and redeployment efforts have been in progress, not all employees could be effectively repositioned, making the layoffs unavoidable.
The message further stated that affected employees will be supported with severance packages, career counselling, outplacement assistance, and extended health insurance. HR and business leaders will directly engage with impacted individuals during the transition.
Mr Krithivasan reiterated that TCS will continue hiring top-tier talent and investing in workforce development. “It is not about reducing headcount. It is about being able to deploy people where they are needed. That is our focus,” he said.
Changing Delivery Models and Tightening Bench Policies
TCS’s evolving business model—moving from traditional waterfall project management to agile, product-based structures—has reduced the need for conventional project and program managers. Despite extensive training efforts—550,000 employees have been trained at foundational levels and 100,000 at advanced levels—many senior professionals have struggled to keep pace with the transition.
The layoffs coincide with stricter bench policies implemented since 12 June 2025. Under the new rules, TCS employees must log at least 225 billable days annually, with maximum allowed unallocated (bench) time limited to 35 calendar days per year. Exceeding this limit can result in job termination and possible loss of experience certificates.
From 12 June 2025, employees on the bench (i.e., not currently assigned to any project) must now work four to six hours daily on upskilling while reporting to the office. Those who remain unallocated beyond 35 days risk termination and loss of experience certificates. At least 100 employees in Bengaluru have reportedly exited under these rules in the past two weeks.
Industry-wide Trends
TCS is not alone in facing these challenges. HCLTech’s CEO, C Vijayakumar, recently acknowledged that employees have been let go due to automation-led redundancies. Wipro has introduced mandatory English communication assessments and failure to pass can now lead to performance improvement plans.
Across the Indian IT industry, hiring has slowed in recent quarters. Tier-1 IT companies have added net headcount in only three of the past 11 quarters since the COVID-19 surge, according to Axis Capital.
Companies are now focused on improving utilisation rates and driving growth through productivity gains rather than headcount expansion.
Financial Results and Operational Pressures
TCS’s first quarter (Q1) FY25-26 results reflect underlying operational pressures. Revenue stood at Rs63,437 crore, showing a modest 1.3% year-on-year (y-o-y) growth. In US dollar terms, revenue declined by 1.1% to US$7.42bn (billion) and by 3.1% on a constant currency basis.
The company chief financial officer (CFO) Samir Seksaria attributed the muted performance to client delays in discretionary spending, citing geopolitical tensions, economic uncertainties, and supply chain issues. Despite this, the company maintained an operating margin of 24.5% (up 30bps- basis points sequentially) and a net margin of 20.1%. The total contract value (TCV) rose to US$9.4bn, a 13.2% increase y-o-y.
However, a mismatch between capacity and demand became apparent. TCS had scaled up hiring in anticipation of growth, which didn’t materialise in Q1. This led to excess capacity and pushed employee costs to 47.6% of revenue—described by Mr Seksaria as 'probably at an all-time high.'
The company now aims to optimise this imbalance through better resource utilisation, workforce rebalancing, and productivity enhancements.
Shifting Skills Strategy
TCS has also adjusted its hiring strategy. In FY24-25, 40% of trainee hires were in digital roles, up from 17% the previous year. Half of all lateral hires brought high-end skills in emerging areas such as generative AI. The company’s chief human resources officer (CHRO) Milind Lakkad noted that clients increasingly expect projects to incorporate AI for productivity improvements—shifting delivery expectations and the skill sets required.
With these new demands, TCS has begun recalibrating lateral hiring to match project requirements more closely. This realignment follows the recent experience of overcapacity and underutilisation.
Long-term Implications for the IT Sector
According to analysts like Keith Bachman of BMO Capital Advisors and Phil Fersht of HFS Research, AI’s long-term impact will force major IT companies to either gain market share or secure new AI-driven revenue streams. Clients are already demanding 20%–30% price reductions in contracts, increasing pressure to cut costs and reduce reliance on manpower-heavy models.
This is leading to a broader shift across the industry—towards leaner, more automated operations with fewer billable hours and flatter workforce structures. Analysts expect this transition to last for at least a year, with companies prioritising AI-integrated roles and reducing headcount where skill gaps persist.
Navigating a Complex Transition
The developments at TCS are emblematic of a fundamental transformation in the Indian IT landscape. Companies are moving from people-intensive service models to technology-driven operations where agility, automation and high-value digital skills are critical to remaining competitive.
While TCS continues to hire for specialised roles, the concurrent release of employees who no longer fit the evolving model reflects the dual realities of growth and disruption. As the industry adapts to AI and digital transformation, workforce strategies will remain central to sustaining momentum and profitability.
