Companies are now cutting worker pay to fund AI investment- Teradata, TTEC slash employee benefits as AI spending surge
Artificial intelligence is no longer just a threat to employment. As companies in the US begin to openly redirect their payroll budgets towards AI transformation, it is now eating away at the pay packets and benefits of the workers who still have them. Business Content reported.
Teradata freezes annual salary increases to fund AI investment
Teradata, a global cloud software company with about 5,100 employees, told employees in January not to expect annual salary increases this year, according to an internal memo seen by Business Insider and not previously reported elsewhere.
Teradata’s focus for 2026 is “winning in the marketplace with AI,” and achieving that goal will require greater investment in AI talent and expertise, the company’s CEO, Steve McMillan, wrote in the note.
“We will fund this AI investment by reallocating the budget from the 2026 annual salary adjustments,” McMillan said.
A spokesperson told Business Insider that the company is actively investing in artificial intelligence to innovate its products and services.
Two US-based Teradata employees, both of whom have been with the company for more than a decade, said: Business Content They generally received annual salary increases of 2% to 4%, but noted that these increases were not guaranteed every year.
According to the new regulations, employees will continue to receive performance-based bonuses and shares. The decision will apply to staff in countries where regulators do not require market-oriented salary adjustments.
TTEC pauses retirement benefits as second firm ties AI spending to compensation cuts
Teradata is the second company Business Content According to the report, employees clearly say they are prioritizing AI spending over workforce investment. TTEC, a mid-sized technology and services firm, recently paused 401(k) matches for U.S. employees through the end of 2026, stating in internal communications that the move would help fund the tools, training and talent needed for its AI goals.
The candor with which company leaders now cite AI as the reason for cutting employee pay represents a significant 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 are companies financing AI transformations?
Both TTEC and Teradata operate in technology services, a sector where failure to adapt to AI is widely recognized as carrying certain business risk. Their decisions reflect a broader pattern. A recent survey of 117 IT professionals RBC Capital It was revealed that 90 percent of respondents plan to increase their spending on artificial intelligence in 2026 and include companies with annual revenues of less than $250 million to more than $25 billion.
The cost of AI adoption varies significantly, from tens of thousands of dollars for small pilots or basic integrations to millions for enterprise-scale transformations. These costs are falling at a time when many businesses are already operating under tighter budgets due to inflation, tariffs and supply chain disruptions.
Both Teradata and TTEC have faced financial pressure in recent years; global revenue fell 5% and 3.2%, respectively, in both companies’ last fiscal year.
moss said Business Content It is stated that as artificial intelligence costs increase, reducing workers’ compensation is a choice rather than a necessity. Transformations can be financed through other means, he noted, including borrowing, reallocating unnecessary expenses, adjusting executive salaries, phasing investments over time or accepting lower margins for a period of time. Alphabet, for example, announced this week that it plans to sell $80 billion in shares to finance investments in artificial intelligence infrastructure.
He added that for most companies, the actual cost of AI investment is relatively small compared to the total compensation spend. Businesses expect to spend about 1.7% of their revenue on AI in 2026, according to BCG’s 2026 AI Radar, a January survey of 2,360 global companies.
Economists warn of long-term labor consequences
Jan-Emmanuel De Neve, economist and director of the Center for Wellbeing Research at the University of Oxford, said: Business Content He expects more companies to make similar compromises as they seek to adopt AI, describing the trend as indicative of a short-term mindset.
Layoffs and hiring freezes increase pressure on workers
Compensation cuts represent the less severe end of a broader spectrum of AI-related workforce changes. Many large companies have directly tied staff reductions to their AI strategies. Meta laid off 10% of its workforce in May, attributing this decision to efficiency and the need for investment financing. The company had previously announced that capital expenditures for 2026 would range between $115 billion and $135 billion.
While Snap, Cisco and Salesforce also announced staff cuts due to AI efficiency, Uber’s chief executive said in May that the company would offset the cost of its AI investment by reducing hiring.
Teradata’s own headcount has fallen more than 21% since December 2023, according to company filings; this is a reduction of approximately 1,400 jobs that the company attributes to its growth strategy.
