TCS appraisal letters spark employee concerns over CTC changes; company denies salary cuts

Recent appraisal letters from Tata Consultancy Services (TCS) have sparked significant discussions among employees regarding changes to their compensation structures, appraisal ratings, and take-home salaries. Some staff members have raised allegations of reductions in their cost-to-company (CTC) figures, as reported by The Times of India. The concerns have emerged alongside the implementation of new labour codes, particularly regarding how gratuity is calculated within TCS's revised salary structure. Employees have expressed confusion over the exclusion of gratuity from their latest CTC breakdown, prompting inquiries about the changes. In response to these worries, TCS emphasized that the new framework is centered on three primary principles: adherence to updated labour laws, standardization of wage structures across its Indian workforce, and the protection of employee take-home pay while allowing for tax efficiency. A spokesperson for TCS reassured employees that there have been no reductions in gross or net pay. The company explained that employees might notice an increased gratuity amount reflected in their June payslips due to adjustments made under the Code on Social Security, 2020, which ties gratuity calculations to “wages” instead of just basic pay. Documentation revealed that the revised wage structure now categorizes components such as basic pay, city allowance, and personal allowance as part of “wages” under the new regulations. Conversely, allowances such as house rent, conveyance, provident fund contributions, and statutory bonuses are now treated as exclusions. Performance-linked incentives, health insurance premiums paid by the company, and ESIC contributions are classified separately and not included as part of wages. TCS assured employees that they would benefit from either the TCS Gratuity Scheme or the Social Security Code framework, depending on which option offers greater advantages. The gratuity multiplier will be determined by the employee's tenure effective from July 1 this year. A TCS representative indicated, “Previously, gratuity was incorporated into the CTC. However, under the new wage code, gratuity accruals have risen since calculations are now based on wages instead of only basic salary. Employees will observe increased gratuity accruals on their pay slips.” These developments come amid mounting concerns regarding the company's appraisal cycle. Reports have surfaced indicating that TCS managers were instructed to ensure at least 5% of employees are categorized in the lowest performance band, ‘Band D’. An internal email from a TCS HR executive highlighted the directive to critically assess and compile a list of associates eligible for this classification. This appraisal-related turmoil follows TCS's announcement of a plan to eliminate around 12,200 positions, approximately 2% of its workforce, as part of a larger restructuring and AI-driven transition strategy. Despite a sequential increase of 2,356 employees in its workforce during the January-March quarter, TCS has experienced a year-on-year decline of 23,460 employees, with the voluntary attrition rate climbing to 13.7%.