Inside Tata Consultancy Services, the gap between 3% and 5% is now the most-watched number in the building. Managers at India’s largest software exporter have been told to slot at least 5% of staff into Band D, the lowest of five performance grades, for the FY26 appraisal cycle now closing, according to an internal email reviewed by news agency Mint. Business unit heads had already identified roughly 17,500 underperformers, about 3% of headcount. The HR instruction is asking them to find more.
That is the second act of a workforce reset whose first act ended six weeks ago. TCS shed 23,460 employees in the twelve months to March, almost twice the 12,200 exits disclosed last July when chief executive K. Krithivasan first opened the door on the cuts.
The Five Percent Floor
A TCS HR executive sent the request in April to a business unit head, asking him to review the bottom tier critically and “share the list of associates who can be considered for Band D, thereby meeting the agreed 5% distribution.” Applied across the current global headcount of 584,519, a 5% floor pushes roughly 29,226 employees into the lowest grade of the company’s five-band performance grid.
Please review critically and share the list of associates who can be considered for Band D, thereby meeting the agreed 5% distribution.
The line, attributed to a TCS HR executive in the April email, is the spine of the Mint report published on May 18. The phrasing matters. “Agreed” implies the distribution target was set above the unit head, not negotiated inside it.
A TCS spokesperson, replying to NDTV Profit, framed the cycle differently. The company had “rolled out annual increments to eligible employees” and “completed the restructuring of compensation for all our India-based employees to align with the new labour codes,” the spokesperson said. The statement did not address the 5% instruction.
From 17,500 Flagged to 29,000 Targeted
The arithmetic gap is what unsettles managers. By April, business unit heads had marked about 17,500 employees as underperformers, the level that maps to a Band C or Band D rating. That is around 3% of the company. To hit 5%, they have to find about another 11,690 names before the cycle closes.
That is not a rounding adjustment. It is a directional change in how appraisals function.
- Headcount on March 31: 584,519 employees across the global TCS organisation, per the Q4 FY26 disclosure.
- Three percent already identified: approximately 17,500 staff slotted as underperformers by business unit heads through the year.
- Five percent now mandated: approximately 29,226 staff needed in Band D to meet the distribution target communicated by HR.
- Net additional names required: about 11,690 more associates, drawn from the pool currently rated Band C or above.
Two things have to be true for managers to close that gap. Either the original 3% list under-counted weak performers in a way that internal review can correct, or the bar for “underperformer” has been quietly lowered. Either reading turns the appraisal into a sort by quota rather than a sort by absolute standard. Managers who push back face the same review pressure that named the bottom 3% in the first place.
What Band D Means Inside TCS
The Band D rating is not a paper grade. It triggers a defined sequence. TCS uses a five-band system, A+, A, B, C and D, that maps to increments, variable pay and project allocation. A Band D rating is the most consequential cell on the grid because every downstream HR process keys off it.
The Project Bench
Associates rated Band D are typically rolled off their current client account and sent to the company’s internal bench, the pool of unbilled employees awaiting redeployment. The bench has been the subject of two separate complaints filed with India’s Ministry of Labour and Employment by the Nascent Information Technology Employees Senate (NITES), the IT-services union that has been the loudest voice on TCS’s restructuring through FY26.
The Improvement Plan
From the bench, Band D staff go onto a two-month performance improvement plan (PIP), a structured set of targets monitored by a manager and an HR reviewer. TCS executives told Mint that failure to meet the PIP targets can lead to termination. Multiple internal accounts from employees on Quora and Grapevine over the past three years describe the same flow: Band D, bench, PIP, exit conversation. The 5% quota effectively scales that funnel.
The Pay Effect
Band D ratings sit outside the increment pool. Employees in that bracket either see no annual increase or, in some cases, a structural cut framed as a realignment of fixed-versus-variable pay. TCS top performers received salary increases of around 6% in this cycle, well below the double-digit hikes the company handed out in calmer years. The five-band ladder, in other words, is now wider at the bottom and shallower at the top.
The 23,460-Employee Gap in FY26
The new Band D push lands at the end of the worst year for TCS headcount on record. The company started FY26 saying it would let go about 2% of its workforce, around 12,200 mostly mid- and senior-level staff. By March 31, the actual net decline was almost double that.
| Metric | FY25 Close (Mar 2025) | FY26 Close (Mar 2026) | Change |
|---|---|---|---|
| Total headcount | 607,979 | 584,519 | (23,460) |
| Voluntary attrition (LTM, IT services) | ~13.0% | 13.7% | +70 bps |
| Announced layoff target | n/a | ~12,200 | n/a |
| Q4 net profit (₹ crore) | 12,224 | 13,718 | +12.2% YoY |
| Q4 revenue (₹ crore) | 64,479 | 70,698 | +9.6% YoY |
Krithivasan, who earned about ₹28 crore in FY26 as the cuts ran, said in interviews through last year that the exits were “not because of AI” but about “feasibility in deployment.” The Q4 numbers explain the framing. Net profit of ₹13,718 crore rose 12.2% on the year, revenue grew 9.6%, and the company logged a record annual total contract value of $40.7 billion. The earnings did not need the cuts. The strategy did.
Forced Distribution Returns to Indian IT
Indian IT services has been around this corner before. Infosys publicly scrapped its bell-curve appraisal in 2015 under former chief executive Vishal Sikka, replacing it with a system the company called iCount that judged staff on individual targets. TCS itself denounced the bell curve the same year. Wipro followed. The argument then was that forced distributions broke trust on teams that were performing well in absolute terms.
The new TCS instruction is not labelled a bell curve. It functions like one at the lower tail. By fixing the share of staff who must land in Band D, the company restores the part of forced ranking that produces exits while leaving the upper bands looking discretionary.
Companies that historically used hard forced-distribution targets and later abandoned them include:
- General Electric, which pioneered the “vitality curve” under Jack Welch in the 1980s with a 20/70/10 ranking and dropped it under successor Jeff Immelt.
- Microsoft, which retired stack ranking in 2013 after a Vanity Fair investigation linked it to what former staff described as a decade of internal collaboration loss.
- Yahoo and Adobe, both of which moved to continuous-feedback systems after forced ranking was tied to internal lawsuits and high voluntary attrition.
- Infosys, which used bell-curve grading until 2015 and rebuilt its appraisal around individual goal-setting.
The pattern from those exits is consistent. Forced distributions are easiest to install in the year a company wants to cut, hardest to retire once managers learn to game them.
NITES, Notice Periods, and the Labour Code Question
The legal frame around the next Band D wave is different from the one that governed FY26’s cuts. India’s four new labour codes moved into force across most states this fiscal year, tightening the procedural requirements for retrenchment at employers above the 300-worker threshold. TCS, with 584,519 staff, is well past it.
NITES general secretary Harpreet Singh Saluja has filed three complaints against TCS with the Ministry of Labour and Employment over the past ten months, alleging that the company terminated staff without the statutory one-month notice, retrenchment compensation, or government notification required for employees who have served more than a year. TCS has called the union’s mass-layoff characterisation “mischievous” and “inaccurate,” pointing to its outplacement and counselling support.
The 5% Band D distribution does not directly contradict the labour codes if exits arrive through PIP failure rather than retrenchment notices. That is the procedural difference the company is leaning on. Whether the codes treat a quota-driven appraisal that funnels into a PIP that funnels into termination as a constructive retrenchment is the question now sitting with the labour ministry.
If the ministry accepts the framing, the second wave shows up in the FY27 headcount the way the first wave showed up in the FY26 print: announced as 12,200, delivered as 23,460. If the ministry pushes back and asks for retrenchment notices, the appraisal cycle gets slower, the exits move out by quarters, and the bench grows before it shrinks.
