After a cautious close yesterday, Indian share markets opened flat today, influenced by global cues and the growing focus on the India–US trade deal.
In the midst of this market sentiment, Tata Consultancy Services (TCS) made headlines with a major organisational update.
TCS, India’s largest IT services provider, announced plans to reduce its global workforce by around 2%, affecting nearly 12,000 employees.
How did this announcement impact the stock, and what could it mean for the company going forward? Let’s take a closer look.
The 2% Workforce Cut
As of June 2025, Tata Consultancy Services (TCS) had a global workforce of 613,069 employees. The company has announced a planned workforce reduction of approximately 2%, which translates to about 12,000 roles.
The reduction primarily applies to employees at the mid and senior levels, typically those with 3 to 10 years of experience who have been on the bench, meaning they have not been assigned to billable projects, for extended periods ranging from 3 to 18 months.
(Source: Annual Report 2024-25)
Unlike earlier layoff patterns in the IT sector that often began with entry-level or support roles, this move is focused on experienced employees.
Alongside the workforce changes, TCS has introduced a revised bench policy. Employees will now be expected to maintain at least 225 billable days per year, with the permissible non-project period limited to 35 days annually.
TCS has stated that the workforce reduction will be implemented in a phased manner throughout FY26 to avoid disruption to client operations. The company has also said that it will provide support to affected employees through notice period payouts, severance packages, extended insurance coverage, and access to professional counselling and outplacement assistance.
Reasons For The Layoff
- Evolving Skill Requirements and Role Realignment
TCS has cited a mismatch between existing skills and deployment requirements as one of the key reasons for the workforce reduction. According to CEO K. Krithivasan, the roles affected are largely in the 3–10 years’ experience range and have been unbilled for extended periods. The company clarified that AI-led productivity gains are not the direct cause, but evolving business needs are reshaping role suitability and utilisation.
- Internal Cost Optimisation Measures
The workforce reduction follows recent cost control initiatives. In April, TCS deferred wage hikes, and more recently, it revised its bench policy, capping non-billable days at 35 annually. These steps are aimed at increasing utilisation and aligning internal resource management with delivery needs.
- Delayed Lateral Hiring and Hiring Strategy Reassessment
TCS has also delayed the onboarding of nearly 600 experienced lateral hires. Some candidates who had resigned from previous jobs have reported uncertainty about their joining dates. These delays coincide with broader changes in the company’s workforce planning and cost structures.
- Macroeconomic and Client-Side Spending Pressures
The decision comes amid a weak global spending environment and subdued discretionary IT budgets. Many client organisations are operating under cost pressures driven by inflation, high interest rates, and cautious investment behaviour. These conditions have impacted project pipelines and deal sizes across the sector.
- Sector-Wide Shift in Delivery Models
Indian IT services firms, including TCS, are adjusting to changes in how technology services are delivered. The industry is gradually moving away from headcount-led growth and cost arbitrage toward models based on automation, digital delivery, and specialised skills. This change is influencing organisational structures and staffing patterns across the sector.
Financial Aspects of the Decision
The workforce reduction at TCS comes in the context of continued macroeconomic uncertainty, delayed ramp-ups in client projects, and a slowdown in discretionary IT spending. While the company remains profitable, it has cited a need to rebalance employee costs and align skill sets more closely with current business needs.
In recent months, TCS has implemented a series of internal measures to manage costs. These include a deferral of wage hikes announced in April 2025 and a revised bench policy that caps unbilled days at 35 per year. These steps, along with the layoffs, form part of a broader resource optimisation strategy.
TCS has indicated that the workforce changes are intended to support margin sustainability. The employee cost-to-revenue ratio stood at approximately 47.8% in FY25, a modest improvement from the previous year. This metric reflects the ongoing efforts to maintain operational efficiency through resource realignment.
| Year End | Total Revenue | Employee Benefit Expenses | Employee Cost as % of Revenue |
| Mar 2023 | 225,458 | 145,788 | 64.70% |
| Mar 2024 | 240,893 | 140,131 | 58.20% |
| Mar 2025 | 255,324 | 107,300 | 42.00% |
(Source: Annual Report 2024-25)
The decision to reduce headcount is not tied to any immediate financial distress, but rather is part of a longer-term framework aimed at adapting to changing market dynamics. Alongside technological investments and internal restructuring, the move is expected to support the company’s goal of maintaining financial stability in a constrained demand environment.
Implications Of The Restructuring:
- Strategic Vision and Organisational Alignment
TCS has stated that the current workforce changes are part of a broader effort to evolve into a “future-ready organisation.” This includes initiatives such as investments in new technologies, market expansion, and internal restructuring. The company is also focusing on deploying AI in both client-facing and internal operations. The workforce reduction is positioned as a step towards aligning talent with evolving business needs and redeploying resources toward growth areas.
- Operational Agility and Cost Management
The company has described the restructuring as part of efforts to enhance operational efficiency and streamline delivery models. The changes are also aimed at redirecting capital toward technology investments. This follows two earlier steps: the deferral of employee wage hikes in April 2025 and the implementation of revised bench policies in June. TCS is also managing its employee mix to maintain profitability in a period of delayed client project ramp-ups and constrained discretionary spending.
(Source: ET)
- Response from Employee Unions
Several employee unions, including NITES, the Karnataka State IT/ITeS Employees Union, and FITE, have publicly opposed the layoffs. These groups have described the workforce changes as unjustified and urged affected employees not to resign under pressure. Formal requests have also been made to government authorities to review the termination process. The unions have advised employees to maintain written records and seek legal or administrative recourse if necessary.
(Source: ET)
- Stock Market Reaction
Following the announcement of the workforce restructuring, TCS shares declined by up to 1.80%, touching ₹3,079.20 on the BSE. The stock closed at ₹3,081.20 on the BSE and ₹3,081.60 on the NSE, marking a fall of approximately 1.7% from the previous session on 28th July 2025.
(Source: Money Control)
Conclusion
TCS’s restructuring comes at a time when the Indian IT sector is witnessing a slowdown in net hiring and a shift toward automation-driven delivery models. In Q1 FY26, the top six IT firms added just 3,847 employees, a 72% decline from the previous quarter. Similar changes have also been seen globally at companies like Microsoft, Google, and Meta.
As an investor or observer, you may consider tracking company updates, earnings reports, and broader industry developments to stay informed and evaluate any future decisions regarding the stock.
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Yash Vora is a financial writer with the Informed InvestoRR team at Equentis. He has followed the stock markets right from his early college days. So, Yash has a keen eye for the big market movers. His clear and crisp writeups offer sharp insights on market moving stocks, fund flows, economic data and IPOs. When not looking at stocks, Yash loves a game of table tennis or chess.
