Introduction
Why TCS reducing hikes year by year
Tata Consultancy Services (TCS), a prominent player in the IT industry, has seen a declining trend in salary raises over the years. This article delves into the reasons behind this decision and explores its implications for both TCS employees and job seekers.
Charitable Obligations and Government Contracts
There are various reasons cited for the reduction in salary hikes within TCS. One common explanation is the heavy charitable obligations the company undertakes. TCS is not just a private company but is often referred to as semi-governmental, given its contributions to various social and charitable causes. A significant portion of the company's revenue is spent on philanthropic activities and initiatives aimed at societal development.
Additionally, TCS plays a crucial role in government-sponsored projects and initiatives. An example of this is the launch of GST website, which was developed by Infosys, a competitor to TCS. This suggests that TCS's focus on government work and charitable activities can divert financial resources away from employee benefits like salary raises. While the company has the means to provide financial assistance to other causes, it lacks the resources to offer increased salary increments to its employees.
Employee Salary Structure and Budget Allocation
The structure of TCS salaries is designed to maximize benefits for both the employees and the company. Salary components are significantly influenced by the basic salary. For instance, a lower basic salary results in reduced provident fund (PF) contributions, house rental allowance (HRA), and tax benefits. While this is beneficial for both parties, it is more advantageous for the company.
Example to Illustrate the Impact
Say, new hires receive a salary of 30,000 with only 10,000 as the basic salary. Rent could range from 5-6,000, and PF contributions would be approximately 1,200. Over five years, as the employee's salary increases to 100,000 monthly with a 15,000 basic salary, the employee will receive around 1,800 in PF, yet be expected to pay 20,000 in house rent, with no tax benefits to claim. This arrangement allows the company to keep PF contributions to a minimum, enhancing their financial stability and allowing them to focus on other aspects of business, including government contracts and philanthropic activities.
Market Placement and Employee Aspiration
Another factor that influences TCS's salary hikes is the nature of the job. TCS offers higher salaries for specialized roles in TCS Digital or Innovation Labs, where employees contribute significantly to the company's innovation and digital transformation efforts. Conversely, regular positions are often mundane and require less skill. TCS adopts an outsourcing strategy for these roles to take advantage of the cost-effectiveness of local foreign workers compared to international counterparts.
Given that TCS is a service-based company, the focus on cost efficiency often leads to lower salaries for the majority of employees. Advancing in the company or moving to a more competitive company can lead to better salary growth. If one’s aspiration is to earn more, improving skills and seeking opportunities in the market is the best way to achieve that.
Conclusion
The decision to reduce salary hikes within TCS is a complex interplay of various factors. While it may seem disheartening to employees, understanding the financial and operational realities behind these decisions provides clarity. For job seekers, TCS can still be a valuable choice due to job stability and medical benefits. Nonetheless, aspiring candidates should consider their long-term career goals and weigh the benefits against their personal aspirations for higher compensation.
For those already employed at TCS, exploring opportunities for career advancement and skill development can lead to better compensation in the future. Best wishes in your career journey!