TCS's recent layoffs may harm the company in the long run, Jefferies estimates in the report
TCS: Tata Consultancy Services' (TCS) decision to lay off 2 percent of its workforce, around 12,000 employees, as part of cost-cutting measures may have a negative impact on the company in the long run. Jefferies has said this in its recent report. Let's know about this in detail.
Tata Consultancy Services' (TCS) move to fire 2 percent of its staff, about 12,000 employees, as a measure of cost reduction can have an adverse effect on the company in the long term. Jefferies has stated this in its latest report.
The move, as per the report, is the company's growing concentration on maintaining margins in the face of continued growth challenges. It is the third cost-saving measure by TCS in the past three months.
Earlier, the IT giant deferred salary hikes to April 2025 and introduced new benching guidelines in June 2025. The updated benching policy now limits an employee's non-billable period to just 35 days in a year. "Focus on cost cutting may hurt TCS in the long term...: TCS's move reflects its increased focus on maintaining margins amid continued growth pressures," Jefferies said.
According to the report, TCS has not historically been among the top payers in the industry, but it has managed to maintain below-average attrition levels due to its focus on providing long-term career growth and job stability.
However, the report cautioned that this current round of layoffs could hurt employee morale in the near term and potentially lead to delays in implementation. In the long term, such cost-cutting measures could lead to a sharp increase in attrition, as was seen at Cognizant between 2020 and 2022.
That being said, the layoffs in TCS look more firm-specific. Jefferies emphasized that overall net recruitment in the IT sector has remained modest since FY22. This is mainly because of the extended softness in the demand scenario. Cost optimization has become a key factor in securing new deals in the IT sector, as clients continue to demand improved productivity.
The layoffs are also driven by the growing use of artificial intelligence (AI). AI is enabling companies to do more work with the same staff or deliver the same results with fewer employees. In such a situation, layoffs naturally occur, especially when rehiring employees takes longer during weak demand.
