TCS changes its hike structure, does away with anniversary hikes

The changes come at a time when the industry is seeing demand constraints from its majority market and budgets are under pressure and deals are taking time to close

India’s largest IT services player Tata Consultancy Services (TCS) has put a stop to its anniversary hikes for lateral hires, who complete a year at the company. This is effective April 1, 2022.

Instead, the company will now follow the industry norm of annual salary hike. According to sources in the know, the anniversary salary hike will be given to freshers as usual. 

When contacted, a TCS spokesperson said, “We have always had increments in line with industry benchmarks. Even during the pandemic, we ensured that our increment cycles were unaffected. It is incorrect to suggest otherwise. All experienced hires will be given an increase as part of the annual salary appraisal that follows their one-year anniversary.”

The statement came from the company as several employees received mail saying they will not be receiving anniversary hikes.

“There has been a recent revision in TCS Policy around the first anniversary.

Effective April 1, 2022, all experienced professionals with an anniversary date of April 1, 2022, or after will not receive a letter and/or increments on completion of the first year. The first increment will be at the subsequent annual increment cycle (April 2023),” said the letter.

The changes come at a time when the industry is seeing demand constraints from its majority market and budgets are under pressure. Also, deals are taking time to close.

Industry experts and HR heads that Business Standard spoke to said that no other company or industry gives an anniversary hike to its employees.

“Around 99 per cent of companies across sectors do not have anything called an anniversary hike. What they have is either an annual hike or a financial year hike or quarterly variable payouts,” said Anshul Lodha, head of Page Executive India.

According to company sources and people who have worked at TCS, the IT major would give an anniversary hike for lateral hires as they complete a year at the company. And, these employees were entitled to the annual salary revision that followed the anniversary hikes.

“I think with attrition at a high, a lot of employees would have not liked this arrangement as the laterals would come with higher salary increments. In some cases, it would be 40-50 per cent and then again they would get an annual salary hike.

The industry practice is for laterals to get an annual salary hike that follows their completion of a year in the company,” said a senior executive from another IT company on condition of anonymity.  

Lodha also pointed out that recession in majority markets like the US and Europe is making companies relook at every possible lever to contain costs. They want to see that margins are not further impacted.

For FY21, TCS logged a net addition of 40,185 to its headcount. The company does not give any break up for lateral and freshers. But its hiring is skewed towards freshers. For FY21, fresher hiring was 39,000.

Continued attrition and higher salaries to retain talent have impacted Indian IT services margins significantly.

Recent media reports suggest that Wipro will not be paying variable pay to managers who fall in the Band-C category.

Similarly, Infosys said that it will be paying only 70 per cent of variable pay.