TCS layoffs: A big talent reset is coming soon for India’s IT sector; are employees ready?

Days after posting a third straight quarter of revenue decline, India’s largest IT services and consulting firm, Tata Consultancy Limited (TCS) made the bombshell announcement that, in order to future proof the company in FY26, it would be looking at reducing its workforce by 2%, thereby impacting over 12,000 employees. The company, which currently employs over 6.13 lakh people, in a statement said, “As part of this journey, we will also be releasing associates from the organization whose deployment may not be feasible. This will impact about 2% of our global workforce, primarily in the middle and the senior grades, over the course of the year.” On Monday, July 28, TCS's announcement sent the stock market in a tizzy, with the shares large IT companies turning red on the BSE.  

But hiring at Indian IT firms have been stagnating for a while. The onset of the Covid-19 pandemic saw tech transformation accelerate, propelling IT companies to go on a hiring spree, with top firms adding over a whopping 70,000 people. However, as the pandemic receded, hiring growth began to moderate, with the excess intake of Covid years, coupled with attrition slowing down, resulted in fewer net additions in subsequent years.

Talking about this, Milind Shah, Managing Director, Randstad Digital India sees the current hiring stagnancy in India’s IT services sector primarily as a result of strategic recalibration.

“There is now a sharper focus on hiring for specialized skills like AI integration, machine learning, data engineering, and cybersecurity. The marginal growth in hiring reflects this transition from volume-based hiring to value-led talent acquisition”, Shah said.

Take for instance between Q1 of FY22 to Q1 of FY23, the top 5 large IT companies, headquartered out of India, added over 26,0000 employees. Subsequently, many of them also staggered the onboarding of freshers. Coming on the back of slower growth in FY25, especially for large companies, along with global macroeconomic uncertainty weighing in for FY26 -- barring Infosys and Wipro -- currently the rest of the companies in the pack still have a net addition in their overall head count, above the pandemic peak levels. Among the large IT companies, HCLTech has delivered industry leading revenue growth for two straight years.

In the IT sector, now the focus is growing on retaining those who have a relevant skill-set. Most importantly, along with a tighter scrutiny of talent,  there is also a stronger pivot to those hire that talent who are well-versed in the technologies of the future.  

For instance, at the beginning of this fiscal, TCS said that it was looking at an increased fresher hiring in FY26. Milind Lakkad, CHRO, TCS, in the earnings call during April this year, outlined how the mix of talent hiring stood in FY25: “The percentage of hires we have in digital is 40% compared to 17% last year (FY24). So that definitely changes from a standpoint of a mix -- and 50% of our lateral hires are coming in with high-end skills, including AI/GenAI and others as well.” TCS is not alone in this. HCLTech has also stated that it is now looking at hiring freshers with skills and specialization to build an elite cadre, where the average pay package would be much higher.

In fact, in late February of this year, C Vijayakumar (CVK), CEO and MD of HCLTech, talking to Fortune India pointed at the biggest fundamental shift happening in the industry. “The 30 years of linear growth in head count and revenue is definitely not going to be there any longer. We are already seeing decoupling of revenue growth ahead and headcount growth. There is more IP, more solutions, more outcome based, more platform-based services, which are becoming more relevant than just the important people-based services”, CVK said.  

Sunil Chemmankotil, Country Manager, Adecco India, explains that Indian IT sector is looking at a strategic shift, at least in the domain of workplace planning. “We are seeing a recalibration in hiring with quality taking precedence over quantity. Demand for high-value talent in emerging domains such as AI, cybersecurity, digital engineering, and more continues to remain strong, with an estimated upswing of 20% over the same quarter in FY25. While some firms are reporting short-term headcount dips due to internal restructuring, geopolitical uncertainties, macroeconomic headwinds, etc., this does not reflect a slowdown in overall hiring momentum”, he said in a statement.

With attrition stabilizing, the focus now is also on improving utilization rates and deploying its workforce on projects rather than maintaining a bigger bench for the pipeline. For instance, Infosys’s ‘project maximus’, an exercise to improve the company’s cost and profitability, has seen the company inch towards higher utilization rates.  In Q1 of FY26 the company’s utilization rates, excluding trainees, stood at 85.2% while including trainees was 82.7%, which, when compared to two fiscals ago, in Q1 of FY24 stood at 81.1% and 78.9%, respectively.

Similarly, LTIMindtree’s new boss, Venu Lambu, during the company's earnings call, said that the focused approach to operational efficiency resulted in an improvement of 2.3% in utilization levels, from 85.8% in Q4 FY25 to 88.1% in Q1 FY26.

“In the future, if we have a demand pattern of an orderly demand pattern, which gives us good visibility for a couple of quarters ahead, which is slightly challenging in the macroeconomic environment, I will say probably 86-87% would be a healthy utilization to have”, he had said.

Gen AI and Skills

In just over 2 years of generative artificial intelligence becoming mainstream, the skills required to service these technologies have seen most companies undertaking large scale reskilling exercises for their workforce.

Neeti Sharma, CEO, TeamLease Services, is of the opinion that despite the requirement for AI skills being high, the talent with AI experience in India is very minimal.

“While some companies are hiring those with skills in Python stack and then upskilling them. There's a lot of investment being made in learning and upskilling once again as against what we've seen for the last two years ago, there was a huge dip on that”, she said.

According to Sharma, with focus on upskilling the existing work force, and global benchmarking of AI skills, the middle management layer is getting hugely impacted because of this whole transformation.

"And who in the middle management stage are getting impacted? It is those who are largely people [who have] roles which are just people management”, Sharma added.  

Industry experts, however, see the retention strategies, enhanced internal mobility programmes for employees, and focused long-term career development opportunities working well for companies in an uncertain global economic environment. Alongside jobs in business segments centring around AI engineering, enterprise automation, GenAI and cloud security are continuing to grow steadily irrespective of macro conditions, given that investments into AI for productivity has not seen a slowdown.