TCS layoffs: Why analysts are saying that 'headcount problem' is bigger for TCS than any other Indian IT company

Tata Consultancy Service (TCS) recently announced to sack its 2% global workforce, which translates to nearly 12,000 employees. A report by Economic Times stated that the IT giant may freeze the hiring of experienced personnel and pause annual salary increases globally, adding to a broader slowdown in the tech sector. The report quotes an executive who said that the job cuts may be problematic for TCS due to the company’s large size and structure. “The magnitude of the problem is more pronounced for TCS simply because of its size and structure,” the executive told the publication. “But some other firms were quicker to realize the AI transformation wave and invested early in making pivots. We have been seeing silent restructuring on people's side for almost two quarters. Whether TCS will trigger a talent bloodbath is difficult to say at this point.”Brokerage firm Jefferies warned that the TCS job cuts could be a “canary in the coal mine” moment for IT services. “TCS' move to cut 2% of its workforce may lead to execution slippages in the near term and higher attrition in the longer-run for the firm and reflects a weak demand environment for the sector,” the report said. “With most deal wins being led by cost-optimisation initiatives and involving AI-led productivity pass-through, IT firms unable to gain share may have to resort to layoffs.”

Phil Fersht, CEO and chief analyst at HFS group, on the other hand, said “TCS has the biggest bloat around the middle compared to its peers.” “Most others have been gradually trimming the middle for years now but it's clear that TCS can't afford that extra weight any more. This is more of a warning sign to get their people to step it up and a smart move to show they are shedding their stuffy image,” Fersht added.

What TCS told its employees on senior hiring freeze

In an email seen by ET, TCS informed its employees:“As far as FY26 is concerned, on the global front, TCS Q1FY26 results have been impacted by ongoing political tensions and macroeconomic uncertainties. In response, the company has made the difficult decision to put a pause on annual salary increases globally–a decision aimed at ensuring long-term stability and sustainability of the organisation. While the outlook remains positive with a robust pipeline, we have observed similar cautious behaviour among our customers, which warrants our prudence.As per instructions from team leaders, almost all lateral hires have been frozen, a mid-level employee told ET on the condition of anonymity.There is a huge operational cost cutting in place, we have been told.”

NITES writes to the labour ministry on TCS job cuts

Nascent IT Employees Senate (NITES) – an IT union, has condemned TCS's layoffs. The employee welfare body was written to the labour ministry, complaining against what it terms “illegal layoffs.”“The law clearly states that no employee who has served for over a year can be retrenched unless the company provides one month’s notice or wages in lieu, pays statutory retrenchment compensation, and notifies the government,” NITES wrote in its letter to the ministry.