Tata Consultancy Services (TCS) recently announced plans to lay off about 2% of its workforce, that’s roughly 12,000 employees. This move comes as part of a bigger cost-cutting drive amid ongoing growth challenges, says a detailed report from Jefferies. It’s the third such step in just three months. Earlier, TCS delayed wage hikes in April 2025 and tightened benching rules in June, limiting non-billable days to just 35 annually. While these actions aim to protect the company’s margins, Jefferies cautions they might hurt employee morale and slow down project execution. This shift reflects a wider trend in the IT industry, where companies juggle rising client expectations and the growing impact of AI. As TCS navigates this balancing act, many are watching closely to see how these changes will shape the company’s future, and what it means for employees.
Jefferies Warns: Cost-Cutting May Hurt TCS In The Long Run
Jefferies clearly states, “Focus on cost-cutting may hurt TCS in longer-run…: The move by TCS reflects its growing focus on conserving margins amid continued growth pressures.” Historically, TCS has kept attrition rates low due to its emphasis on job security and career growth, even if it did not lead the industry in pay. However, layoffs risk undermining this stability. The report cautions that employee morale might take a hit, potentially causing delays or “execution slippages.” The long-term effect could be a surge in attrition, reminiscent of Cognizant’s experience between 2020 and 2022. This warning underscores the delicate balance between cost savings and maintaining a motivated workforce.
IT Industry Trends Behind TCS Layoffs: Weak Hiring And Cost Optimization
TCS’s recent layoffs, while primarily company-specific, reflect broader trends in the IT industry. Since FY22, net hiring has slowed across the sector amid a moderated demand outlook. Companies are increasingly focused on cost optimization to remain competitive and secure new contracts. Clients now prioritize productivity improvements, with Artificial Intelligence (AI) playing a pivotal role. AI enables firms to maintain or boost output with fewer resources, often leading to workforce reductions—especially when bench redeployment is limited during periods of low demand. In this context, TCS’s actions align with a wider industry shift toward operational efficiency and strategic cost management.
Utilization Rates And Workforce Strategies: How IT Firms Adapt
- Higher Utilization in Slower Growth Firms: IT companies experiencing slower growth operate at higher utilization rates to control costs, maintaining smaller benches (non-billable staff pools).
- Relaxed Utilization in Growing Firms: In contrast, firms with stronger growth maintain lower utilization rates and larger benches to support expanding demand.
- TCS’s Benching Policy Update: TCS has revised its benching policy, now limiting non-billable days to 35 annually, aligning with the industry’s shift toward greater efficiency.
- Efficiency vs. Flexibility: These utilization strategies aim to keep operations lean while ensuring workforce availability to meet client needs.
- Employee Pressure and Attrition Risk: Elevated utilization and continued cost-cutting can heighten pressure on employees, potentially increasing attrition risks.
Also Read: TCS Shares Fall 2% After 12,000 Job Cuts Shock, Nifty IT Slides Over 1% in Sector Selloff
Aishwarya is a journalism graduate with over three years of experience thriving in the buzzing corporate media world. She’s got a knack for decoding business news, tracking the twists and turns of the stock market, covering the masala of the entertainment world, and sometimes her stories come with just the right sprinkle of political commentary. She has worked with several organizations, interned at ZEE and gained professional skills at TV9 and News24, And now is learning and writing at NewsX, she’s no stranger to the newsroom hustle. Her storytelling style is fast-paced, creative, and perfectly tailored to connect with both the platform and its audience. Moto: Approaching every story from the reader’s point of view, backing up her insights with solid facts.
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