Why TCS's Recent Layoffs Could Hurt The Company In Long Run? Jefferies Explains

The recent layoffs by Tata Consultancy Services (TCS) of about 2% of its workforce, or around 12,000 employees, as part of cost-cutting measures could negatively impact the company in the long run, Jefferies said in a report.

What Is The Negative Impact Going To Be?

This move reflects the company's increasing focus on conserving margins amid persistent growth challenges and it is also a third such attempt at cost-cutting by the firm in the last three months, the report noted.

The IT giant deferred wage hikes previously in April 2025 while introducing new benching guidelines in June 2025. According to the updated benching policy the non-billable period of an employee is limited to just 35 days in a year.

"Focus on cost-cutting may hurt TCS in longer-run...The move by TCS reflects its growing focus on conserving margins amid continued growth pressures," Jefferies stated.

Historically, TCS has not been among the top paymasters in the industry, but it has maintained lower-than-average attrition levels due to its focus on providing long-term career growth and job stability, the report noted.

However, these current layoffs can destroy employee morale in the near term and potentially lead to execution slippages.

Additionally, these cost-cutting measures, in the long-term could also lead to a sharp rise in attrition, similar to the trend which was witnessed at Cognizant between 2020 and 2022.

Why Are These Layoffs happening?

TCS's case was specific to the company, the report noted, adding that the overall net hiring in the IT industry has remained weak since the financial year 2021-2022 (FY22). This is primarily due to a prolonged moderation in the demand outlook.

Further, cost-optimization has become a major factor for winning new deals in the IT sector with clients increasingly demanding productivity improvements.

The trend is further driven by the growing adoption of artificial intelligence (AI), which is enabling firms to either do more work with the same number of employees or deliver the same results with fewer workers.

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