TCS employees can sit for exams to be eligible for higher package

Tata Consultancy Services (TCS) is providing opportunities to employees within the system to prove their skills and upgrade their roles within the organisation, something that was earlier open only to campus recruits. 

Campus recruits can also aim to double the existing entry level package by proving their skills through the TCS national qualifier tests (TNQT).

The company posted weaker-than-expected margin performance in Q2, led by strong hiring (14,097 net addition) during the quarter, which analysts believe strained utilisation. It is also likely to dampen the company’s aspirational double-digit growth targets. The management is confident that over the medium to long term (up to three years), this investment in skilled resources will pay off.

“With the TNQT model (pan Indian) for campus hiring, we can find more people who are hungry to prove a point and do well. If someone performs exceedingly well in the TNQT test, then we give them the option for a digital test which they can clear to aim for higher compensation,” said Milind Lakkad, EVP and global head of human resources, TCS. The compensation offered to such candidates will be twice the entry-level compensation offered for campus recruits.

Starting FY20, the same opportunity has been extended to employees who joined the system up to three years ago, said Lakkad. 

Last year, 1,300 of the 30,000 campus offers made were upgraded to the digital scale. Employee cost is tagged to SG&A expenses, while they are not directly generating revenue through client projects. The SG&A component has been higher this quarter. However, the hiring-revenue mismatch is not causing a utilisation constraint, noted the management.

“The revenue was lower than expected but hiring was on target. But that doesn’t mean they are sitting idle. Utilisation levels are healthy but they can improve,” said V Ramakrishnan, chief financial officer, TCS. At the end of Q2, 322,000 employees had been trained on multiple new technologies, and 391,000 trained on Agile methods. TCS continued to report industry leading attrition rate of 11.6 per cent.

The employee pyramid and hiring models are being rationalised towards long-term goals of cost optimisation. The TNQT model has not been introduced to other geographies yet.

“We are almost close to 50:50 ratio of locals in US. They go through the same L&D programmes with very specific customer context training. We are localising elsewhere but not to the scale in the US,” said Lakkad.

In FY19, TCS reported net hiring of 29,287, whereas in the first half of FY20, it hired 26,633. The management has, however, indicated that lateral hiring in H2 will be more calibrated now that the target base has been achieved.

“Margin contraction due to employee revenue arbitrage may normalise in 2H once cost-optimisation levers kick in. Pyramid rationalisation also remains key for optimising margins,” noted Anmol Garg, research analyst, Motilal Oswal.