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

Appraisal letters issued by Tata Consultancy Services (TCS) have triggered employee discussions around compensation structures, performance banding, and take-home salaries, with some staff alleging reductions in cost-to-company (CTC) and downgrades in appraisal ratings.

According to a report by The Times of India, employees noticed changes linked to the implementation of new labour codes, particularly around the treatment of gratuity in the company’s revised salary structure.

The report said several employees questioned why gratuity was excluded from their latest CTC breakup. Responding to the concerns, TCS said the revised framework was built around three key principles: compliance with the new labour codes, standardisation of wage structures across its India workforce and protecting employee take-home pay while maintaining flexibility for tax efficiency.

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“There has been no reduction in employees' gross pay or net pay,” a TCS spokesperson told the publication.

The company said employees could see a higher gratuity value reflected in their June payslips due to changes under the Code on Social Security, 2020, which links gratuity calculations to “wages” instead of only basic pay.

Documents showed that under the revised wage structure, components including basic pay, city allowance and personal allowance are now categorised as part of “wages” under the labour codes. Meanwhile, house rent allowance (HRA), conveyance allowance, provident fund contributions, superannuation or National Pension System (NPS) contributions and statutory bonus are treated as exclusions.

Performance-linked variable pay, company-paid health insurance premiums, ESIC contributions and other incentives are being classified separately and are not considered part of wages, according to the report.

The company said that employees would receive gratuity under either the TCS Gratuity Scheme or the Social Security Code framework, depending on whichever provides a higher benefit. The gratuity multiplier will depend on employee tenure as of July 1 this year.

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“Earlier, gratuity was shown as part of CTC. Under the new wage code, gratuity accruals have increased because calculations are now linked to wages rather than just basic salary,” the spokesperson said. “Employees will see higher gratuity accruals reflected in their pay slips.”

The development comes amid broader concerns around the company’s appraisal cycle. Earlier, Mint reported that TCS managers were asked to ensure that at least 5% of employees are placed in the lowest performance category, ‘Band D’.

Citing an internal email sent by a TCS HR executive to a business unit head in April, the report said managers were instructed to “review critically and share the list of associates who can be considered for Band D, thereby meeting the agreed 5% distribution.”

The appraisal-related discussions also come months after TCS announced plans to reduce around 12,200 roles, or nearly 2% of its workforce, during FY26 as part of a broader restructuring and AI-led transition strategy.

In its January-March quarter results, TCS reported a sequential addition of 2,356 employees, taking its workforce to 584,519. However, the company’s headcount declined by 23,460 employees year-on-year, while its last-12-month voluntary attrition rate rose to 13.7%.