India’s largest software services provider, Tata Consultancy Services (TCS), will be letting go of 2 percent of its workforce, or roughly over 12,000 employees, over the next year, in a bid to become more agile and future-ready amid rapid disruptions in technology.
The move will impact employees across countries and domains in which it operates and will happen through the fiscal year 2026 (April 2025 to March 2026).
“We have been calling out new technologies, particularly AI and operating model changes. The ways of working are changing. We need to be future-ready and agile. We have been deploying AI at scale and evaluating skills we will be requiring for the future. We have invested a lot in associates in terms of how we can provide them with career growth and deployment opportunities. Still, we find that there are roles where redeployment has not been effective. This will impact roughly 2 percent of our global workforce, primarily at middle and senior levels. It has not been an easy decision and one of the toughest decisions I have had to take as CEO,” TCS CEO K Krithivasan told Moneycontrol in an interview on Sunday.
TCS has an employee headcount of 6,13,000 for the latest quarter ended June, so a 2 percent reduction will impact roughly 12,200 employees.
“It’s a difficult call we have to take to build a stronger TCS”, Krithivasan said, adding that the company is working to make the process as compassionate as possible.
Apart from notice period pay and an added severance package, it will also look to extend insurance benefits and offer outplacement opportunities for the impacted employees. TCS is one of India’s largest employers in the private sector and its move to undertake this restructuring could have a ricochet effect, with its smaller rivals following suit.
When asked if this was the impact of AI-led productivity gains or the nature of macro and demand, Krithivasan said, “This is not because of AI but to address skills for the future. This is about feasibility in deployment not because we need less people.”
Changes in bench policy
The move comes weeks after TCS tweaked its employee bench policy, requiring staff to maintain at least 225 billable days annually and limiting time on the bench to less than 35 days.
“They are removing all the people who are on bench for more than 2 months. First, they are allocating an HR person to each employee to meet in person. On meeting them, they will ask the employee to resign immediately and they will get around 3-month salary in severance pay,” an impacted employee with more than four years of experience told Moneycontrol, seeking anonymity.
The employee added, “If they don’t oblige, they will get terminated by the company and won’t be eligible to get the severance pay also.”
An email sent out to the employee showed that the person was immediately released on submitting the resignation letter. Moneycontrol saw a copy of this email.
Two analysts following TCS said the cuts reflect an AI-driven shift, where traditional skills like testing are declining in relevance and some senior employees resist adapting to the new landscape. They noted that client projects are becoming smaller and shorter, demanding fewer staff as companies increasingly push software providers to leverage AI for greater efficiency.
Saubhik Bhattacharya, General Secretary, AIITEU told Moneycontrol, “TCS has also delayed onboarding of at least 500 lateral hires who were issued offer letters and were due to join in June-July 2025.”
Earlier this month, in an interview, TCS CEO and MD K Krithivasan had shared that there were some delays in decision-making by clients in the April-June quarter, which he expects would close in the coming quarters.
“There were very few cancellations; it was more delays or scope reduction. In some places where you expected the project to be finalized and start the work, there were decision-making delays,” he said.
Speaking on the new bench policy, Krithivasan had said, “It's not an efficiency drive. We just want to ensure associates are able to seek projects and ensure that they remain productive through the year.”
“This number is not a new number either. If people have been on the bench for a long period of time, we continue to encourage them to get allocated very quickly. This is more to put a positive pressure and incentive for them to be allocated and be engaged in client projects,” he added.
New Billability Policy
The new policy was announced on June 12 by the Resource Management Group (RMG), which is responsible for deploying employees on projects. As per the changed rules, employees will have to proactively approach the RMG to get assigned on projects to ensure that they have 225 days of billability over a 12 months period at any given point.
If the employee misses on the billability target, they will face disciplinary action including cessation of service, the policy said.
Employees also cannot be on bench for more than 35 days a year.
In March, Moneycontrol had reported that the top IT services majors have been reducing the average bench time and sizes in the past year and a half to defend margins and improve utilisation rates.
It has come down to 35-45 days at present compared to an average of 45-60 days in FY20 and FY21, when the sector’s revenue growth was in the higher double digits. This trend is expected to continue in FY26 too, data from UnearthInsight had showed.
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