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Your annual raise didn’t disappear because the company struggled. It disappeared because the company made a choice. In January 2026, Teradata CEO Steve McMillan sent an internal memo to all 5,100 employees of the global cloud software firm with a message that cut straight to the bone: there would be no annual salary increases this year. The money, he said, was going somewhere else entirely. That somewhere else was artificial intelligence.
McMillan’s memo told staff that Teradata’s primary goal for the year was to “win in the market with AI.” To get there, the company planned to increase investment in AI talent and capabilities. But the budget for all of it had to come from somewhere. “We will fund this AI investment by reallocating the budget from 2026 annual salary adjustments,” McMillan wrote. For a workforce that had counted on 2% to 4% raises most years, the math was simple and the message was stark.
Employees were not left entirely without compensation options. McMillan’s memo noted that performance bonuses and equity shares would remain available. The salary freeze also applied only in countries where local regulators did not mandate market-aligned pay adjustments. But for the majority of Teradata’s global workforce, 2026 would arrive without one of the most basic expectations of stable employment. The question employees were left with was whether this was a one-time sacrifice or a preview of what comes next.
Teradata Is Not Alone: TTEC Suspended 401(k) Matches for 16,000 Workers for the Same Reason
Teradata’s decision was candid. It was also not isolated. Around the same time, TTEC, a roughly $2 billion customer experience technology firm, suspended its 401(k) employer match for approximately 16,000 U.S.-based employees through the end of 2026. Chief People Officer Laura Butler announced the move in an April 30 memo, citing the need for financial flexibility to invest in AI tools, training, and automation. For a worker earning $60,000 and contributing 6% of their salary, the suspension translated to a loss of $1,800 in annual employer contributions.
Butler framed the nine-month pause as a measure to protect the company’s long-term strength, with a commitment to reassess in early 2027. But the backdrop made the decision harder to absorb. TTEC’s stock had collapsed from over $110 in 2021 to roughly $3 by May 2026. First-quarter revenue had fallen 7% year-over-year. Benefits researcher Craig Copeland of the Employee Benefit Research Institute noted that benefit cuts of this kind tend to appear before layoffs, a signal that companies are bracing for harder conditions.
Both TTEC and Teradata belong to an industry where failing to adapt to AI is treated as an existential threat. Global AI spending is projected to reach $2.53 trillion in 2026 and $3.34 trillion in 2027, according to Gartner. Companies across all revenue tiers are feeling the pressure to move. A CIO survey from RBC Capital found that 90% of IT professionals polled planned to increase AI spending in 2026. The costs of that bet are not falling on executive compensation. They are falling on the people doing the work.
Experts Say Cutting Worker Pay for AI Is a Choice, and It Tells Employees Something Specific
The decision to freeze salaries or suspend retirement benefits to fund AI is not the only way a company can finance a technology transformation. Workplace strategist Jennifer Moss, author of “Why Are We Here?”, told Business Insider that companies can take on debt, reallocate nonessential spending, adjust executive pay, or accept lower margins for a defined period. What makes worker compensation the target, she said, is that it is the largest controllable expense line at most companies and the one that faces the least organized resistance.
Moss also flagged something significant about how these decisions are being communicated. Leaders are now openly naming AI as the reason for compensation cuts, a rhetorical shift she described as new territory. “Whether that’s more honest or more cynical depends on your read, but it does mark a real shift in what leaders are willing to say in public,” Moss said. “And what becomes sayable tends to become more doable.” The openness itself carries weight, because it normalizes the trade-off and makes it easier for the next company to follow.
Oxford economist Jan-Emmanuel De Neve, director of the university’s Wellbeing Research Center, put a sharper point on what the messaging communicates internally. When leaders openly cut human compensation to fund AI, he told Business Insider, they may be projecting decisive, tech-forward management to investors. But the actual message landing inside the organization is that employees do not have a secure future there. BCG’s 2026 AI Radar found that companies expect to spend about 1.7% of revenue on AI, a figure that makes the scale of compensation cuts harder to justify.
Teradata’s Headcount Has Fallen 21% Since 2023, and the Broader Power Shift Is Already Underway
Teradata’s workforce has shrunk by more than 21% since December 2023, a loss of roughly 1,400 positions the company attributed to its growth strategy. That reduction sits alongside the salary freeze as part of a broader pattern. Meta cut 10% of its workforce in May while its capital spending for the year was set between $115 billion and $135 billion. Snap, Cisco, Salesforce, and Uber have all cited AI efficiency as a rationale for reducing headcount or slowing hiring. The compensation squeeze and the layoff wave are moving in the same direction.
Employment attorney Ellen Raim, with 30 years of corporate HR leadership experience, told Business Insider that companies are under mounting pressure to demonstrate productivity gains and stronger returns on headcount. AI is being positioned as the fastest path to those numbers. What makes the current moment different is that companies are making that argument out loud, to the people most directly affected by it. Standard Chartered CEO Bill Winters recently described certain roles as “lower value, human capital,” a phrase he later apologized for, but the underlying logic was already visible in balance sheets.
The deeper risk, Raim said, is that companies asking employees to embrace new AI tools and help identify where they can create value are simultaneously signaling that those same employees are expendable. That is a difficult ask. Workers are being told to invest their energy, creativity, and institutional knowledge in a transformation while the company invests its budget elsewhere. The pay freeze at Teradata, the 401(k) suspension at TTEC, and the broader drift toward treating compensation as a funding source for AI represent something the spreadsheet does not capture: the erosion of the condition under which employees trust a company enough to do their best work.