Tata Consultancy Services (TCS), India’s largest IT services provider, has announced a significant workforce reduction, planning to cut approximately 2% of its global staff over the next year.
The move will impact roughly 12,000 employees, primarily in middle and senior-level positions, as the company navigates a landscape reshaped by technological disruptions and macroeconomic pressures.
As of the end of June 2025, the Mumbai-based technology giant employed a global workforce of 613,069. The layoffs are scheduled to occur throughout the fiscal year 2026, which spans from April 2025 to March 2026.
In a statement, TCS framed the decision as a strategic step toward building a more agile and competitive organization. “TCS is on a journey to become a future-ready organisation… As part of this journey, we will also be releasing associates from the organisation whose deployment may not be feasible,” the company announced.
The Driving Forces: AI, Skill Gaps, and a Shifting Market
Technological Disruption and AI: While TCS CEO K Krithivasan stated that the layoffs are “not because of AI,” he acknowledged the profound impact of new technologies. The company has been deploying AI at scale and re-evaluating the skills it needs for the future. Analysts suggest that as automation reduces the need for roles like manual testing, some senior employees have found it challenging to adapt to emerging technologies.
Skill Mismatch and Redeployment Challenges: Krithivasan noted that despite significant investment in reskilling and redeployment initiatives, there are roles where these efforts have not been effective. The layoffs target employees whose current skills are not aligned with the company’s future needs, making their deployment difficult.
Economic Headwinds: The IT sector is grappling with a challenging global environment where clients are curbing non-essential technology spending due to weak demand and inflation. Krithivasan previously pointed to delays in client decision-making and project initiations as a key issue.
The Warning Sign: A Stricter “Bench” Policy
The announcement of layoffs did not come as a complete surprise to many employees. The move was preceded by a significant change in the company’s “benching” policy, which took effect on June 12, 2025.
The revised policy significantly tightened the rules for employees who are “on the bench,” meaning they are not currently assigned to a client project. The new guidelines stipulate:
- A maximum of 35 business days on the bench per year.
- A minimum of 225 billable business days annually.
This change sparked considerable anxiety among employees, with many taking to social media platforms like Reddit to express fears that it was a precursor to mass layoffs or “forced resignations”. An internal memo warned that long periods of being unallocated would “adversely impact… continuity of employment with the organisation”.
Support for Departing Employees
CEO K Krithivasan described the decision as “one of the toughest” he has had to make. The company has emphasized its commitment to a compassionate exit process for the affected employees. The support package includes:
- Severance pay in addition to salary for the notice period.
- Extended insurance benefits.
- Outplacement services and counseling to help employees transition to new opportunities.
Broader Implications for the IT Sector
As the largest employer in India’s private sector, actions taken by TCS often serve as a bellwether for the entire industry. This workforce reduction comes at a time when job additions across the top six IT majors have already seen a steep decline of over 72% in the April-June 2025 quarter compared to the previous one.
The move by TCS could signal a broader trend of “employment rationalisation” across the IT sector, as companies grapple with the dual pressures of a sluggish global market and the transformative impact of artificial intelligence.
Conclusion: A Strategic Pivot in a New Era
The decision by TCS to reduce its workforce by 12,000 is more than a simple cost-cutting measure; it represents a strategic pivot to align the company with the demands of a new technological era. By focusing on future-ready skills and streamlining its middle and senior ranks, TCS is making a difficult but calculated move to maintain its competitive edge.
This restructuring highlights the profound changes underway in the global IT industry, where adaptability and continuous upskilling have become paramount for both companies and their employees. As the sector continues to evolve, the focus will remain on how firms like TCS manage this transition while balancing strategic goals with their responsibility to their vast workforce.
