A CEO denied raises to spend money on AI instead. Companies have ‘no idea what they’re going to need in a workforce’ when the AI race is over

As the rush to adopt artificial intelligence (AI) continues to sweep through industries, a growing number of companies are making a shocking decision: cutting raises to employees to fund AI investments. The move, which affects thousands of workers, raises concerns about the long-term consequences of prioritizing AI over human talent.

Background & Context

Teradata, a global cloud software company with over 5,100 employees, recently informed its workforce that there would be no annual salary raises this year. The decision was made to "win in the market with AI," as stated in an internal memo by CEO Steve McMillan. Similarly, TTEC, a customer experience technology and services company, told its 15,000 U.S.-based employees that it would stop 401(k) matches until the end of 2026.

The trend of cutting employee compensation to invest in AI is not isolated to these two companies. A recent survey of 866 business leaders found that more than half plan on cutting employee compensation to move that spending towards AI. Companies are reported to be cutting bonuses, equity awards, and raises to invest in AI-enabled tools and automation, believing it will ultimately lead to revenue growth and a competitive advantage.

Key Details

According to an internal memo, Teradata employees typically receive a 2% to 4% salary raise each year. However, this year, the company will be reallocating the budget from 2026 annual salary adjustments to fund AI investments. TTEC, on the other hand, will stop 401(k) matches until the end of 2026 to protect the long-term strength of the company and invest in AI certifications and training.

Stacie Haller, chief career advisor at Resume Builder, expressed concerns about the long-term consequences of cutting raises and benefits. "Companies are taking advantage of job-hugging in the low-hire, low-fire labor market, but cutting raises and benefits could backfire on employers in the long run," she said.

What Experts Say

Haller believes that companies are cutting without thinking about the long-term consequences. "Everybody's racing to stay ahead of the game, and they have really no idea what they're going to need in a workforce afterwards," she said. Companies may be cutting raises and benefits to create some attrition instead of conducting mass layoffs in the name of AI productivity.

"People have long memories. They're going to remember when they didn't get bonuses because of AI spending, and if it doesn't work out in the end, I don't think it's going to be a happy ending for some of these companies," Haller said.

Key Takeaways

• Over 50% of business leaders plan on cutting employee compensation to invest in AI.
• Companies are cutting bonuses, equity awards, and raises to invest in AI-enabled tools and automation.
• Teradata employees will not receive annual salary raises this year to fund AI investments.
• TTEC will stop 401(k) matches until the end of 2026 to protect the long-term strength of the company and invest in AI certifications and training.

What This Means For You

As AI continues to transform industries, workers may face increased competition for jobs and reduced benefits. It's essential to stay adaptable and develop skills that complement AI, such as creativity, problem-solving, and critical thinking.

Employers, on the other hand, must carefully consider the long-term consequences of prioritizing AI over human talent. By investing in employee development and retention, companies can build a strong foundation for future growth and success.

Ultimately, the decision to cut raises to invest in AI is a complex one that requires careful consideration of both short-term and long-term consequences. As the AI landscape continues to evolve, it's crucial for companies and employees to work together to create a future that benefits both.