- Key Insight: Uncover how employers are using artificial intelligence to redesign their employee reward strategies.
- What's at Stake: Employers risk losing trust and good employees if managers fail to explain compensation changes.
- Supporting Data: 16% of employers are confident managers can explain one specific type of change.
Source: Bullets generated by AI with editorial review
Companies are increasingly using artificial intelligence to redesign their reward strategies, but just 16% of employers are confident that their managers can explain AI-related pay and workplace changes to employees, according to new research.
Only 43% of employers say their managers
Tom McMullen, who leads total rewards for the firm, said many managers are being handed AI-driven decisions with little to no talking points or context. That becomes particularly challenging as AI reshapes how employers define their employee value proposition, he said.
"That's a problem, because when employees do not get straight answers on why their role or pay has changed, trust can erode quickly," McMullen said. "In practice, that can lead to attrition or resistance to the next change effort. Companies cannot afford to lose good employees over communication and change issues that they can address and prevent."
McMullen emphasized that trust is often built more through smaller conversations with managers than companywide messaging. He encouraged benefit leaders to "provide managers with an understanding of intent and plan around AI and rewards and help them make this real for their employees … By closing the gap between leadership decisions and what employees are hearing from their managers, trust will increase over time."
The survey was conducted in June 2026 and is based on responses from 5,512 organizations across 135 countries. Respondents were primarily HR and total rewards professionals representing organizations of varying sizes, geographic locations, and ownership structures.
Budgets stay tight as employers rethink rewards
The survey also asked employers about expected salary increases for 2027 and found that U.S. salary budgets are projected to remain flat at a 3% median. Globally, most organizations expect to provide annual salary increases to the majority of their employees, with 42% planning increases for at least 95% of workers and 77% planning increases for at least 80%.
"This is consistent with the broader business outlook in the report: Organizations expect revenue growth, but they are also facing the risk of global slowdown, high labor costs, the impact of AI, and operating model pressures," McMullen said. "This is why it is important to broaden the definition of reward to include everything the organization provides its employees of value. Flat salary-increase budgets mean employers need to lean harder on mobility, reskilling, and clear development and career growth paths — including around AI skills."
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"It's also important to make sure your top performers feel differentiated treatment, even if the salary increase pool is thin," he continued. "Nonfinancial rewards like scheduling flexibility, interesting work, recognition, and career growth conversations can carry real weight when salary increases are lean."
McMullen added that
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"Employers handling it well treat transparency as a chance to build credibility and trust, while those viewing it as a compliance requirement may well risk losing employee trust quickly," McMullen said. "As pay transparency regulations expand, employees are going to increasingly judge their leaders, as well as rewards programs, based on whether they understand and trust the decisions being made."
As employers face
"The underlying question has shifted from 'What can we cut?' to 'What value does this benefit create for attraction, retention, capability building, and workforce resilience?'" McMullen said. "If usage of the program is low and/or the cost is high relative to perceived value by employees and the organization, that program may risk being deprioritized or cut."
