TCS to Lay Off 12,000 Employees Amid AI Shift: Mid and Senior-Level Staff in the Spotlight IMP
India’s largest IT services firm, Tata Consultancy Services (TCS), has announced plans to reduce its global workforce by approximately 2%, impacting over 12,000 employees, primarily in middle and senior management roles. This significant restructuring, set to unfold over the fiscal year 2026 (April 2025–March 2026), is part of TCS’s strategy to become a “future-ready and agile” organization amid rapid technological shifts, particularly in artificial intelligence (AI). Here’s an in-depth look at the reasons behind this move, its implications, and what it means for the Indian IT industry.
The Context: A Strategic Shift Toward AI and Automation
As of June 2025, TCS employed 613,069 people globally. The planned layoffs, affecting roughly 12,200 employees, are driven by the company’s need to realign its workforce with evolving industry demands. CEO K. Krithivasan, in an interview with Moneycontrol, described the decision as one of the toughest of his career, emphasizing that it is not a cost-cutting measure but a strategic response to “skill mismatches” and the changing nature of work.
While Krithivasan has clarified that AI is not directly replacing jobs, analysts argue that automation and AI-driven technologies are reshaping demand in the IT sector. Traditional roles, such as manual testing, are becoming obsolete, and some mid- and senior-level employees are struggling to adapt to newer, tech-driven environments. “This is not because of AI but to address skills for the future. This is about feasibility in deployment, not because we need less people,” Krithivasan told Moneycontrol.
TCS’s “Project Fluidity” initiative underscores this transformation. The program evaluates senior managers’ performance, placing underperformers on the bench and, in some cases, leading to their exit if redeployment isn’t feasible. The company has also tightened its bench policy, requiring employees to maintain at least 225 billable days annually and limiting bench time to 35 days. This stricter policy has sparked concerns among employees, with some alleging forced resignations to secure severance packages.
Why Mid and Senior-Level Staff Are Most Affected
Unlike previous layoffs, which often targeted junior roles, TCS’s current restructuring focuses on middle and senior management. This shift reflects the changing skill requirements in the IT industry, where AI and automation are reducing the need for traditional managerial and testing roles. Senior employees, often with specialized but outdated skill sets, face challenges in transitioning to emerging areas like AI, cloud computing, and data analytics.
TCS has invested heavily in upskilling, with over 114,000 employees trained in advanced AI skills and 15 million hours spent on emerging technologies in Q1 FY26 alone. Despite these efforts, redeployment has not been effective for all roles, particularly at higher levels where adaptability to new technologies can be slower.
The layoffs also come amid weaker client demand and macroeconomic uncertainties. TCS reported a 6% year-on-year net profit growth to Rs 12,760 crore in Q1 FY26, but revenue growth was sluggish at 1.3%, reflecting delays in client decision-making and project starts. These factors, combined with clients demanding 15-30% fee reductions, are pushing TCS to optimize its workforce for efficiency.
Employee Support and Backlash
TCS has committed to supporting affected employees through severance packages, extended health insurance, notice period compensation, outplacement services, and counseling. However, the new bench policy has drawn criticism. Employees claim that those on the bench for over 35 days are pressured to resign, with severance pay offered only to those who comply voluntarily. Failure to resign could lead to termination without benefits, according to reports.
Additionally, TCS faces scrutiny for delaying the onboarding of over 600 lateral hires, prompting complaints from the Nascent Information Technology Employees Senate (NITES) to the Union Labour Ministry. These delays, coupled with the layoffs, have fueled concerns about job security in the Indian IT sector.
The Bigger Picture: AI’s Impact on the IT Industry
The TCS layoffs are part of a broader trend in the $283 billion Indian IT industry, which is grappling with AI-driven disruptions and shrinking client budgets. Automation is reducing demand for legacy roles, and companies like TCS are prioritizing “AI-native services” and IP-led growth to stay competitive. HFS Research notes that this is a “margin-first move,” with TCS aiming to preserve profitability while reinvesting in next-gen technologies.
Other tech giants, both in India and globally, are following suit. Posts on X highlight similar moves, with companies like Inmobi projecting 80% code automation and Salesforce halting software engineer hiring due to AI-driven productivity gains. The Indian IT sector saw a 72% drop in net hiring in Q1 FY26, with only 3,847 employees added across the top six firms, signaling a structural shift.
What’s Next for TCS and Its Employees?
Despite the layoffs, TCS remains optimistic about its long-term growth. The company added 6,071 employees in Q1 FY26 and continues to invest in AI infrastructure, data platforms, and business applications. Krithivasan has emphasized that if the macroeconomic environment improves, TCS will offer competitive salary hikes and adjust hiring plans accordingly.
For affected employees, the transition will be challenging but not without support. The severance packages and outplacement services aim to ease the process, though the emotional and professional toll of layoffs, especially for long-serving mid- and senior-level staff, cannot be understated. Social media reactions on X reflect growing anxiety about AI’s impact, with users warning that “the AI threat is already here” and predicting increased competition and lower pay in the tech job market.
Advice for IT Professionals
For those in the IT sector, the TCS layoffs serve as a wake-up call to prioritize upskilling. Key areas to focus on include:
- AI and Machine Learning: Proficiency in AI tools and frameworks is increasingly critical.
- Cloud Computing: Expertise in platforms like AWS, Azure, or Google Cloud is in high demand.
- Data Analytics: Skills in data science and analytics are essential for future-ready roles.
- Soft Skills: Leadership, adaptability, and problem-solving remain valuable for senior roles.
Professionals should also leverage online learning platforms, certifications, and networking to stay competitive in an AI-driven market.
Conclusion
TCS’s decision to lay off 12,000 employees marks a pivotal moment for the Indian IT industry, highlighting the transformative impact of AI and automation. While the company frames the move as a strategic realignment to build a “future-ready” organization, the focus on mid- and senior-level roles underscores the challenges of adapting to a rapidly evolving tech landscape. As TCS navigates this transition, the broader industry must balance innovation with workforce stability to ensure sustainable growth.
For employees and aspiring IT professionals, the message is clear: embrace continuous learning and adaptability to thrive in an AI-driven future. As the industry evolves, those who align their skills with emerging technologies will be best positioned to succeed.
Stay informed about industry trends and upskill to stay ahead in the ever-changing IT landscape.
