Tata Consultancy Services (TCS) has decided to freeze lateral hiring and pause annual salary increases globally, according to sources cited by the Economic Times.

This hiring freeze follows the company’s recent announcement that it will lay off 12,000 employees, about 2% of its 600,000-strong workforce, adding to rising anxiety in the industry as it grapples with slowing demand and growing pressure from artificial intelligence.

“The Tata Group unit has already started phasing out hundreds of benched staff in Hyderabad, Pune, Chennai and Kolkata, in line with its new policy that mandates such employees to find projects in 35 days or leave," the Economic Times reported, quoting a C-suite executive.

The company’s strategy reportedly involves a sharper focus on AI deployment, technology investments, market expansion, and workforce realignment. TCS stated on Sunday that the changes are part of its transformation into a “future-ready organisation.”

TCS’s workforce stood at 6,13,069 as of June 30, 2025, with the company having added 5,000 employees in the April-June quarter. However, the layoff impact is expected to be more pronounced at the middle and senior levels.

Meanwhile, the Ministry of Electronics and Information Technology (MeitY) is closely monitoring the situation. Sources, as reported by PTI, said the ministry is in touch with the company and is looking into the underlying causes of the layoffs.

Employment growth remains a top priority for the government, sources added, noting that initiatives like Employment Linked Incentives (ELI) are being evaluated for their potential to boost job creation.