India’s largest software exporter Tata Consultancy Services (TCS) has increased quarterly variable pay out for mid-to-senior level employees to up to 80 percent for the third quarter. The development coincides with the IT major’s ongoing workforce overhaul to align with AI-driven priorities, while management stays optimistic about demand in 2026.

This is a big shift coming after nearly two years of variable pay out being slashed to 20-50 percent for the mid and senior-level employees, sources told a Source.

“Most mid-level employees got about 80 percent of their variable pay out. Mid-level employees are now receiving variable pay close to what was mentioned in their offer letter CTC. For senior level employees, it is still between 40-80 percent,” an employee said on condition of anonymity.

Another employee said they received their variable pay for the October-December quarter in January.

The decision appears to be driven by the upbeat outlook of the company from a demand perspective. TCS is also doubling down on its AI strategy, having announced it clocked $1.8 billion in annualised AI revenue and worked on 5,000 projects till date.

These developments signal resilience in the near-term despite IT stocks taking a beating in recent weeks following concerns over AI-led disruptions.

Previously, TCS maintained it gave out 100 percent quarterly variable allowance to more than 70 percent of its staff, which sources were largely junior workforce.

Queries sent to TCS remained unanswered at the time of publishing. The copy will be updated when the response comes in.

Not just TCS, Infosys, too, raised its average quarterly variable allowance to 85 percent in Q3, it’s strongest variable pay in recent years.

Cognizant will roll out a 100 percent bonus payout for 2025 after entering what it calls the “Winner’s Circle”, an internal benchmark denoting top-tier industry performance.

Cognizant achieved this milestone two years ahead of its target.

TCS’ AI-led hiring strategy

FY26 is a significant year for TCS, as it is letting go about 2 percent of its workforce, or roughly over 12,000 employees, to become more agile and future-ready amid rapid technology disruptions. The move is primarily affecting mid to senior-level employees, A Source wrote last year.

The Tata group company released 6,000 employees in Q2 and around 1,800 in in the next, taking the restructuring-linked exits to 7,800 in two quarters.

Its headcount fell by around 30,000 during the period, implying that roughly 22,200 exits were from outside the restructuring exercise.

There’s a shift in its wider employee pyramid structure. TCS is doubling down on AI-native fresher or trainee hiring.

The IT firm is also changing its hiring strategy by onboarding lateral talent with future-ready skills. It is also hiring more in the areas of cyber security, enterprise solutions, cloud, advisory and consulting talent etc, that’s positioning them closer to customers.

“Today more than 50 per cent of our experienced hires are coming with next gen skill sets,” Aarthi Subramanian, executive director–president and chief operating officer, TCS, said at TCS Analyst Day in December.

TCS management on demand outlook

TCS’ optimism is driven by its strong deal pipeline visibility for Q4. In the December quarter, the company reported $9.3 billion in deal total contract value (TCV), surpassing analyst estimates of $7-9 billion.

Speaking at the company’s earnings conference on January 12, CEO K Krithivasan said, “If this trend continues, we will be somewhere closer to about $38-39 billion for the year, which will be one of the highest. We believe this order book will help us in growing in FY27 as well. We are now quite comfortable with the order book itself.”

Globally, the IT services industry continues to face geopolitical headwinds, bear the brunt of US tariffs and H-1B visa policy changes to name a few.

“As far as Q4 international revenue is concerned, we are optimistic and we will take every step that is required to see we reach the aspiration of having a revenue better than FY25,” the CEO said.