One of the world's largest cloud storage companies, Teradata, has informed its employees that they will not receive any salary hike this year. According to a report by Business Insider, in an internal memo, Teradata CEO Steve McMillan told the company's 5,100 employees that there will be no annual salary adjustments in 2026. The decision reflects the company's strategy to 'win in the market with AI' by diverting funds from compensation to investments in artificial intelligence talent and expertise.
McMillan explained that the company will fund its AI initiatives by reallocating the budget from annual salary hikes, a move that breaks with past practice where employees typically received 2 to 4% increases. While base pay increases are off the table, employees will still receive performance-based bonuses and equity shares. The policy also applies in countries where regulators do not mandate market-aligned salary adjustments.
AI Over Workforce Investment
Teradata is not alone in prioritizing AI over employee benefits. Another midsize technology company, TTEC, recently paused 401(k) matches for U.S. employees through 2026 to free up funds for AI tools and training. Workplace strategist Jennifer Moss told Business Insider that company leaders are now openly naming AI as the reason for job cuts, marking a rhetorical shift in corporate communication.
Increasing AI Costs and Shrinking Employee Perks
Companies across industries are ramping up their AI spending. A recent survey by RBC Capital revealed that around 90% of CIOs plan to increase their AI budgets in 2026, with costs ranging from small pilot projects to multimillion-dollar enterprise transformations. Yet experts believe that cutting compensation is a choice, not a necessity. Alternatives include debt financing, executive pay adjustments, or phased investments. Alphabet, for instance, announced plans to sell $80 billion in stock to fund AI infrastructure.
Impact on Employees and Risks Involved
Teradata's headcount has already fallen by 21% since December 2023, with 1,400 jobs cut as part of its growth strategy. Analysts warn that sidelining employee compensation could erode trust at a time when companies need workers to embrace new AI tools. Oxford economist Jan-Emmanuel De Neve described the move as a 'short-term mindset,' projecting decisive leadership but signaling insecurity to employees.
