Artificial intelligence is no longer only a threat to jobs. It is now eating into the pay packets and benefits of workers who still have them, as companies across the US begin openly redirecting compensation budgets towards AI transformation, Business Insider has reported.
Teradata freezes annual salary raises to fund AI investment
Teradata, a global cloud software company with approximately 5,100 employees, told its workforce in January not to expect this year, according to an internal memo seen by Business Insider and not previously reported elsewhere.
The company’s chief executive, Steve McMillan, wrote in the memo that Teradata’s focus for 2026 is to “win in the market with AI,” and that achieving that goal would require increased investment in AI talent and expertise.
“We will fund this AI investment by reallocating the budget from 2026 annual salary adjustments,” McMillan said.
A spokesperson told Business Insider that the company is actively investing in AI to innovate its products and services.
Two US-based Teradata employees, both of whom have been at the company for over a decade, told Business Insider they had generally received annual salary increases of between 2% and 4%, though they noted such increases were not guaranteed each year.
Under the new arrangements, employees may still receive performance-based bonuses and equity shares. The decision applies to staff in countries where regulators do not require market-aligned salary adjustments.
TTEC pauses retirement benefits as second firm links AI spending to compensation cuts
Teradata is the second company Business Insider has reported is openly telling employees it is prioritising. TTEC, a midsize technology and services firm, recently paused 401(k) matches for its US employees through the end of 2026, citing in internal communications that the move would help fund the tools, training, and capabilities required for its AI ambitions.
The directness with which corporate leaders are now naming AI as the reason for scaling back employee compensation represents a notable shift in workplace communication, according to Jennifer Moss, a workplace strategist and author of “Why Are We Here? Creating a Work Culture Everyone Wants.”
How companies are financing their AI transformations
Both . Their decisions reflect a broader pattern. A recent survey of 117 IT professionals conducted by RBC Capital found that 90% of respondents planned to increase AI spending in 2026, spanning companies with annual revenues ranging from under $250 million to more than $25 billion.
The costs of AI adoption vary considerably, from tens of thousands of dollars for small pilots or basic integrations to millions for enterprise-scale transformations. Those costs are landing at a moment when many businesses are already operating under tighter budgets, driven by inflation, tariffs, and supply chain disruptions.
Both Teradata and TTEC have faced financial pressure in recent years, with global revenue declining 5% and 3.2% respectively in each company’s latest financial year.
Moss told Business Insider that while AI costs may be rising, cutting worker compensation is a choice rather than a necessity. She noted that transformations can be financed through other means, including taking on debt, reallocating nonessential spending, adjusting executive compensation, phasing investments over time, or accepting lower margins for a defined period. Alphabet, for example, announced this week that it plans to sell $80 billion in stock to fund its AI infrastructure investments.
She added that the actual cost of is relatively small when measured against total compensation expenditure. According to BCG’s 2026 AI Radar, a survey of 2,360 global companies released in January, businesses expect to spend approximately 1.7% of revenue on AI in 2026.
Economists warn of long-term workforce consequences
Jan-Emmanuel De Neve, an economist and director of Oxford University’s Wellbeing Research Centre, told Business Insider he expects more companies to make similar trade-offs as they pursue AI adoption, describing the trend as indicative of a short-term mindset.
Layoffs and hiring freezes extend the pressure on workers
Compensation cuts represent the less severe end of a wider spectrum of workforce changes being linked to AI. Several major companies have tied staff reductions directly to their AI strategies. Meta laid off 10% of its workforce in May, linking the decision to a drive for efficiency and the need to fund investment. The company had previously said its capital expenditure for 2026 would range from $115 billion to $135 billion.
Snap, Cisco, and Salesforce have also announced staff cuts citing AI efficiencies, while Uber’s chief executive said in May the company would offset the cost of AI investment by reducing hiring.
Teradata’s own headcount has fallen by more than 21% since December 2023, a reduction of approximately 1,400 people that the company attributed to its growth strategy, according to company filings.