3 days ago
HomeMarket NewsTCS struggles with record-slow wage growth as spending squeeze bites
TCS has deferred annual salary hikes amid global uncertainty, citing US tariff tensions and macroeconomic headwinds. Employee costs rose just 4% in FY25, marking the slowest growth in the company’s history.
By Yoosef K April 12, 2025, 12:24:40 PM IST (Published)
In a rare move, India’s largest IT firm, Tata Consultancy Services (TCS), opted not to roll out its wage hikes during the final quarter of the financial year. Meanwhile, overhead expenses have been steadily moderating over the past few years, with employee costs rising by just 4% in FY25 — the slowest pace on record. The move also reflects the growing caution within the IT services sector, as companies tighten budgets amid global uncertainty.
TCS attributed its decision to ongoing macroeconomic headwinds, including tariff tensions between the US and other countries. Notably, about half of the company's revenue comes from the US market.
"Given the uncertainty, we will decide when to implement the increments. This year, the timing of the hikes will depend on the evolving environment," said Milind Lakkad, Chief Human Resources Officer at TCS. He added that salary hikes would be rolled out later in the financial year, once there is greater clarity in the market outlook.
The current decision echoes a similar move made during the onset of the pandemic five years ago, when global business activity had come to a standstill. As a result, TCS’s employee costs rose by only 6.8% in FY21, compared to an average growth of 11% over the preceding five years.
TCS, which allocates nearly 60% of its revenue towards employee wages, spent ₹1.46 lakh crore on its workforce in FY25, up from ₹1.40 lakh crore the previous year. During the year, the company added 6,433 employees, bringing its total headcount to 6,07,979 as of March 2025. Trainee onboarding stood at 42,000 for the year.
However, employee costs have outpaced growth in both revenue and net profit over the last five years. Between FY21 and FY25, employee expenses rose at a compounded annual growth rate (CAGR) of 11.2%, while revenue and net profit grew by 10.2% and 8.5%, respectively. Moreover, TCS’s net profit growth has notably slowed in recent years, rising 10.1% between FY16 and FY20 — a marked deceleration from the 23% growth recorded in the five years through FY15.
Shares of TCS closed Friday’s session at ₹3,231.50 on the NSE, slipping 0.50% from the previous close. The stock has been a notable underperformer this year, plunging 20% compared to the Nifty50’s more modest 3.5% decline over the same period.
