Teradata told its 5,100 employees early this year to forget about the annual salary bump they had come to expect. The money would go to artificial intelligence instead. CEO Steve McMillan laid it out plainly in an internal memo. The focus for 2026 is to “win in the market with AI.”
“We will fund this AI investment by reallocating the budget from 2026 annual salary adjustments,” McMillan wrote, according to Business Insider. Workers typically counted on 2% to 4% increases. Those adjustments stopped. Performance bonuses and equity awards stayed on the table for those who qualified. The decision hit staff in countries without regulatory mandates for market-aligned pay.
Teradata isn’t alone. Months later TTEC paused 401(k) matching for its 15,000 U.S. workers through the end of 2026. The customer-experience firm wanted flexibility to spend on AI certifications, training, tools and automation. “To protect the long-term strength” of the business, chief people officer Laura Butler said in her April memo, as reported by Fortune.
Both moves spotlight a calculation many technology leaders now make openly. Spend more on AI capabilities. Accept the hit to immediate employee compensation. Global AI spending is forecast to reach $2.53 trillion this year and climb to $3.34 trillion in 2027, according to Gartner data cited in the same Fortune report. Companies chase an edge before the technology reshapes work itself.
Teradata’s revenue fell 5% in the latest full year. Its head count has dropped more than 21% since December 2023, a reduction of some 1,400 positions. The company frames the salary pause as part of a growth strategy centered on AI products and services. Spokesperson January Machold declined to discuss the raise decision but told Fortune the firm is “actively investing in AI in both products and services, including a new autonomous agentic platform.” She added, “We are confident in the direction of the business.”
Recent earnings reinforce that direction. Teradata reaffirmed full-year guidance after a solid first quarter driven by its pivot toward AI-led offerings in regulated industries. Management highlighted the “AI Factory” and “Agent Stack” to help companies scale production-grade AI, noting that infrastructure challenges affect 99% of organizations attempting the shift. A May 7 product launch focused on autonomous AI and a unified platform. The firm also received a $480 million gross settlement from SAP, delivering a $302 million net boost to 2026 free cash flow. Those proceeds will help deleverage the balance sheet and create room for further AI investments and buybacks, per a Yahoo Finance summary of the Q1 2026 earnings call.
Yet the salary freeze lands at a moment when employee sentiment already feels strained. A Resume Builder survey of 866 leaders found more than half plan to cut compensation such as bonuses, equity or raises to bankroll AI initiatives. They see it as necessary for revenue growth and competitive position. Stacie Haller, a Resume Builder career expert with 30 years in recruiting, captured the uncertainty. “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 suggested the cuts could encourage attrition rather than mass layoffs. “People have long memories.”
Experts watching the trend express caution. Jennifer Moss, author of “Why Are We Here? Creating a Work Culture Everyone Wants,” told Business Insider the explicit trade-off marks a shift in what leaders feel comfortable saying out loud. And what becomes sayable tends to become more doable. Jan-Emmanuel De Neve, a professor focused on employee wellbeing, described the approach as a short-term mindset that erodes worker security. Ellen Raim, another voice on workplace strategy, noted that companies increasingly position AI as the fast route to productivity gains while treating people as a controllable cost.
But. The broader data shows most organizations plan to ramp up AI budgets. A BCG survey referenced in Business Insider projects companies will devote about 1.7% of revenue to AI in 2026. Ninety percent of firms surveyed intend to increase that spending. Alphabet has sold tens of billions in stock to finance its AI push without similar direct pay freezes. Debt, equity issuance and operational efficiencies offer other paths. Teradata and TTEC chose to tap the compensation pool.
Jared Pope of Work Shield observed that pay used to tie more closely to tenure. Now measurable business impact drives higher rewards. Communication around these changes will determine whether talent stays or walks. Domenique Camacho Moran, an employment lawyer, pointed out that some firms use benefit adjustments to incentivize voluntary departures and reduce head count without formal layoffs.
Teradata’s headcount decline already reflects earlier streamlining. The salary pause extends that logic. Employees finance AI tools that could, in time, handle parts of their own roles. A March 2026 survey mentioned on X suggested 54% of U.S. companies are trimming worker pay to fund AI while 26% have laid off staff for the same reason. Public reaction on the platform mixed frustration with acceptance that the technology race leaves little room for sentiment.
So the question lingers. Does reallocating from salaries accelerate genuine innovation or simply accelerate attrition and distrust? Teradata reports confidence in its AI platform strategy and reaffirmed guidance. Its autonomous agentic offerings target real customer pain points in data unification and scalable production AI. Success there could validate the bet. Failure would leave workers bearing the cost of a miscalculation.
Other technology leaders watch closely. The Teradata memo and TTEC’s 401(k) decision have drawn coverage across outlets including The Independent, Futurism and The HR Digest in recent days. They illustrate a pattern. AI investment now ranks above traditional employee rewards in some balance sheets. Whether that trade-off produces stronger companies or hollowed-out workforces remains the open experiment.
McMillan and Butler presented their choices as strategic necessities. Markets reward those who move fastest on AI capabilities. Employees feel the immediate consequence. The rest of the industry weighs similar options. Some will follow. Others will search for financing that doesn’t touch paychecks. All operate under the same pressure. Win with AI or watch competitors pull ahead. The human ledger records the difference.
WebProNews is an iEntry Publication