The TCS Q4 results are out. As the market is digesting the muted growth outlook and inline revenue performance, the headcount and the employee expenses are something that need to be delved deeper into.
During the year, TCS incurred a total one-off restructuring charge, primarily recognised in Q3, including impact from the new labour code and provisions for legal claims.
TCS: Employee restructuring cost in FY26
In simple terms, this cost is being aligned to the TCS layoffs announced by the company through FY26. In its financial statements the Tata Group company stated, “Termination benefits have been provided as per policy devised for this purpose. Such termination benefits, due to their size, nature or occurrence, are disclosed as “restructuring expenses” under “Exceptional items.”
“Out of the total re-structuring expenses of Rs 1,388 crore provided during the year ended March 31, 2026, Rs 1,268 crore is utilised during the year,” company filing stated.
| TCS Restructuring Expense | FY26 |
| Total expense provided for | Rs 1,388 cr |
| Amount utilised in FY26 | Rs 1,268 cr |
Q4FY26 remained free of any one-off expenses, indicating a return to normal business operations going forward.
The company says, restructuring program initiated in FY26 has now been fully completed. Can one say, the worst is over for TCS? Well, according to Kotak, the hiring requirements have now changed, and they see room for significant hiring between now and FY28.
TCS: Headcount at the end of Q4FY26
Unlike the December quarter, in Q4, TCS saw a net headcount increase by 2,356 employees to 584,519 (up 0.9% QoQ). This is after consecutive quarters of headcount drop seen in Q2 and Q3. Attrition, however, increased by 0.2% QoQ to 13.7% in Q4. For the entire year if one takes note, the TCS headcount has fallen by 23,460. It closed Q4FY26 at 584,519 down from 607,979 at the end of Q4FY25.
| Metric | FY25 (Actual) | FY26 (Actual) | Year-over-Year Trend |
| Total Headcount | 6,07,979 | 5,84,519 | -23,460 (3.85% decline) |
| LTM Attrition Rate | 13.3% | 13.7% | +0.4% (Slight increase) |
| Nationalities | 152 | 149 | -3 (Slight consolidation) |
| Learning Hours | 56 Million | 69 Million | +13 Million (23% increase) |
| AI-Trained Staff | 0 | 2,70,000+ | New priority (AI-first shift) |
The company announced salary increments for all eligible associates effective April 1, with top performers receiving double-digit increases. These hikes are expected to create a temporary 150-200 basis point headwind on margins in Q1FY27.
Speaking on the TCS employee-related concerns, Sumit Pokharna, VP and IT Analyst, Kotak Neo pointed out that these seemed to have been addressed for now.
“So that if I look at it from that perspective, I think broadly the concerns of layoffs and everything, for the time being, you know, can be put to rest. So in fact, if you see, this tech sector major has already announced a salary increment for all eligible employees, and that’s across all grades, and that is effectively applicable from April 1. So that says that people who are relevant at this juncture, they will be rewarded and they will be paid well.”
“We have seen the attrition rate also going up. So broadly, my view is simple: that the company has highlighted that they are looking more on the larger mega deals and they are already done with the employee restructuring,” he added.
Why is attrition a key concern for tech companies
The fears of job losses and AI disruption have been making headlines across the tech landscape. Pokharna explained that “broadly, it’s an industry-wise phenomenon, a lot of upskilling and other things are required to keep pace with the requirements of the clients and the change in the technology. So wherever the companies are saying that upskilling is possible and employees are doing that, they are relevant to the client’s requirement, and they will continue to do that.”
When companies see “type of skills which are redundant and are not required by the client and with the change of technology,” it is difficult to accommodate.
Speaking specifically from the TCS perspective, he explained that “it is not that the employee requirement has gone for a toss and other things. It is only one year where, see, partly it can be, in FY24 also we have seen employee decline overall on a full year basis. In FY26 again we have seen an overall employment decline for TCS.”
Tracking TCS hiring over the years
He further clarified that the TCS hiring needs to be seen in perspective of the post-Covid hiring too.
“You have to see these two numbers in conjunction with FY22. The hiring was over 1 lakh in one year. That is outlier as compared to last few years, previous years to that, maybe 2021 or prior to that or FY23 in fact,” Pokharna pointed out.
According to him, the company had hired “in anticipation of Covid-related demand rising and all that. Some rationalisation has happened in FY24 and in FY26 again, because of the technological change plus excess employee or excess relevance of the employee, some trimming has happened out there.”
TCS likely to see more employee addition over next 2 years
He further explained that the layoffs are “related to excess people TCS had taken in FY22 and partly it is the change in the technology or the skill set required and if these employees are not upskilling. But going forward, our personal view is more employee additions will keep happening over the next three years. For example, in FY27 we expect almost 13,559 employee additions, and in FY28 we are expecting around 19,977.”
He highlighted that hiring specifics may see a shift: “The set of skills that will be acquired now or hired now by the company will be totally different. It is more related to generative AI and other things. Secondly, what I can say is that in this quarter we have seen net addition, and we have also seen salary hikes. So it says that whatever the negative narrative which has been created that a lot of layoffs will happen and all things, I think that is not right and it is change of the energy, change of the skills.”