TCS to Cut 2% of Workforce, Impacting Over 12,000 Employees, as Part of Strategic Restructuring

Mumbai, July 27, 2025 — Tata Consultancy Services (TCS), India’s largest IT services provider, has announced plans to reduce its global workforce by approximately 2%, affecting over 12,000 employees, primarily in middle and senior management roles, over the fiscal year 2026 (April 2025 to March 2026). The decision, described by TCS CEO K Krithivasan as one of the toughest in his tenure, is part of the company’s broader strategy to become a “future-ready” organization amid rapid technological shifts and evolving skill demands.

Strategic Move to Address Skill Gaps and Technological Shifts

In an exclusive interview with Moneycontrol, Krithivasan emphasized that the layoffs are not driven by artificial intelligence (AI) replacing jobs but are instead a response to the need for strategic alignment with future skill requirements. “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,” he said. The company has been deploying AI at scale and evaluating the skills required for future projects, identifying roles where redeployment has been ineffective.

TCS, with a global headcount of 613,069 as of June 30, 2025, is undertaking this workforce reduction as part of its “Project Fluidity,” aimed at enhancing agility and preparing for AI-led business transformation. The layoffs will impact employees across various domains and geographies where TCS operates, with a focus on middle and senior-level positions. The company has assured that the transition is being planned carefully to avoid disruptions in service delivery to clients.

Context of the Layoffs

The decision comes amid a challenging macroeconomic environment and AI-driven disruptions in the IT sector. TCS has faced delays in client decision-making and project initiations, as noted by Krithivasan during the company’s Q1 FY26 earnings announcement. These delays, coupled with a slowdown in demand from key markets like North America, have prompted IT firms to optimize their workforce and improve utilization rates.

Earlier this year, TCS revised its bench policy, limiting employees to a maximum of 35 non-billable days annually and requiring at least 225 billable days. Employees exceeding the bench time limit face the risk of termination, with some reporting pressure to resign voluntarily in exchange for a three-month severance package. An affected employee, speaking anonymously to Moneycontrol, described the process: “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 three-month salary in severance pay. If they don’t oblige, they will get terminated by the company and won’t be eligible for severance pay.”

This stricter bench policy reflects broader industry trends, with Indian IT companies reducing average bench times from 45-60 days in FY20 and FY21 to 35-45 days in FY26 to defend margins and improve efficiency.

Support for Affected Employees

TCS has committed to supporting impacted employees through a “compassionate” exit process, offering severance packages, extended insurance coverage, outplacement services, and counseling to aid their transition to new opportunities. “We understand that this is a challenging time for our colleagues likely to be affected. We thank them for their service and will be making all efforts to provide appropriate benefits and support,” the company stated.

The layoffs follow a period of workforce fluctuations for TCS. In Q1 FY26, the company added 6,071 employees, increasing its headcount to 613,069, but it also reported a net decline of 5,370 employees in Q3 FY25. The company’s attrition rate rose to 13.8% in Q1 FY26, up from 13.3% in the previous quarter, indicating ongoing challenges in employee retention.

Industry Context and Future Outlook

The Indian IT sector, valued at $283 billion, is grappling with reduced client spending due to economic uncertainties, persistent inflation, and geopolitical tensions. TCS’s move to cut 2% of its workforce aligns with industry-wide efforts to streamline operations and focus on high-demand skills, particularly in AI and emerging technologies. Analysts note that traditional roles, such as manual testing, are shrinking, and some senior staff struggle to adapt to new technological demands, contributing to the need for workforce realignment.

Despite the layoffs, TCS remains committed to its hiring plans, particularly for freshers. The company onboarded 42,000 freshers in FY25 and plans to maintain a similar pace in FY26. However, overall hiring has been cautious due to business uncertainties, as acknowledged by Chief Human Resources Officer Milind Lakkad.

Krithivasan emphasized that the layoffs are a strategic necessity to build a stronger, more competitive TCS. “It’s a difficult call we have to take to build a stronger TCS,” he told Moneycontrol. The company is also investing in new markets, deepening partnerships, and creating next-generation infrastructure to support its long-term growth.

Financial Performance

TCS reported a 5.98% year-on-year increase in net profit to Rs 12,760 crore for Q1 FY26, with revenue from operations at Rs 63,437 crore, up 1.13% from the previous year. However, sequential revenue fell by 1.61%, reflecting the impact of delays in project closures. The company secured new deals worth $9.4 billion in Total Contract Value during the quarter, surpassing market expectations.

Employee Concerns and Industry Impact

The layoffs have sparked concerns among TCS employees, with some expressing anxiety on social media platforms like Reddit about the stringent bench policy and its implications. The Nascent Information Technology Employees Senate (NITES) recently filed a complaint with the Union Labour Minister, describing the bench policy as “inhumane” and “exploitative,” highlighting the mental toll on employees facing termination threats.

The layoffs are expected to send ripples across the Indian IT industry, where TCS is a bellwether. With other IT giants like Infosys, Wipro, and Cognizant also facing similar challenges, the sector is undergoing one of its largest retrenchments in recent history.

As TCS navigates this transformation, the focus on reskilling, AI deployment, and workforce optimization will likely shape the future of India’s IT services industry, balancing the need for agility with the challenges of maintaining employee morale and trust.

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