IT Major Announces Pay Hikes Amid Headcount Drop and AI Investment

Tata Consultancy Services (TCS) has implemented annual salary increases across all employee grades effective April 1, 2026. This move comes as the IT services company continues to recalibrate its workforce, reporting a net reduction of over 23,000 employees for the 2026 financial year.

The company ended the financial year with a total headcount of 584,519. This represents a 3.9% decrease in its workforce over the full year, marking a reversal from the previous 2025 financial year when the firm had increased its staff numbers.

Workforce Reduction and AI Transition

The decline in headcount follows a series of layoffs and a shift in corporate strategy. TCS previously announced the reduction of approximately 12,000 jobs, representing about 2% of its global workforce. These cuts primarily targeted middle and senior management across various domains, and countries.

The company cited skill mismatches as a reason for these layoffs. To address these gaps, TCS is focused on retraining and redeploying staff to ensure the organization remains agile amid rapid technological disruptions, specifically those driven by artificial intelligence.

Chief HR Officer Sudeep Kunnumal stated that building an AI‑first culture and providing employees with AI-ready skills were key priorities throughout the 2026 financial year and will remain priorities into the 2027 financial year to align with evolving customer needs.

Financial Performance and Labor Costs

Despite the reduction of more than 23,000 employees, the wage bill for TCS rose by Rs 10,000 crore in the 2026 financial year. This increase coincides with the company’s commitment to delivering wage hikes for its workforce.

In the fourth quarter of the 2026 financial year, which ended in March, TCS saw a net addition of 2,356 employees. The company reported that it continued to invest in experienced talent and campus hires during this period. The firm’s profit for the quarter rose 29% to Rs 13,718 crore.

The company’s attrition rate as of the end of the April to June quarter of the 2025-26 financial year was 13.8% on a last twelve-month basis, which represented a marginal increase on a quarter-on-quarter basis.

Broader Industry Trends

The strategy at TCS mirrors a broader trend among technology giants where companies are balancing workforce reductions with aggressive investments in artificial intelligence. Other firms, such as Oracle, have reportedly cut thousands of jobs to reduce costs while increasing spending on AI.

The industry is currently experiencing a significant shortage of specialized AI skills. Major companies including Google, Meta, and Amazon are competing to hire and retain top AI talent through higher salaries and aggressive recruitment strategies. This shortage is driven by a limited supply of graduates and a gap between university output and the needs of the professional market.

many organizations are willing to pay a premium for AI expertise even while implementing widespread layoffs in other areas of their operations to navigate the shift toward emerging technologies.