CEO Tells Employees Not To Expect Any Raises This Year Because They're Paying For AI Instead

For employees worried about how AI will impact their jobs, there’s good news and bad news. Luckily, they might manage to stay employed despite the increased utilization of AI. On the other hand, it might not really matter that much because they won’t make enough money to live off of.

That was the message one tech CEO sent to his employees when he told them there would be no annual raises in 2026 because the company needed to use that money to invest in AI. While he didn’t actually say that they just aren’t valuing their workers the way they used to, or the way they should, for that matter, that seems pretty clear from reading between the lines.

Teradata wants to ‘win in the market with AI,’ and it’s going to use money that should go to employees to do it.

According to exclusive reporting from Business Insider, the “global cloud software company” let its 5,100 employees know at the beginning of the year that the money that usually goes towards raises would instead be spent on AI. As Steve McMillan, Teradata’s CEO, said, “We will fund this AI investment by reallocating the budget from 2026 annual salary adjustments.”

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A look at Teradata’s website shows that the company is already heavily involved with AI, so it’s unclear why they would need so much money to invest in even more of it, but they definitely aren’t alone. Corporations invested $252.3 billion in AI in 2024, and 78% of workers said their employers used AI.

Business Insider spoke to two Teradata employees who have been with the company for over a decade. They said that no one was ever promised an annual raise, but a 2% to 4% increase was pretty typical. Obviously that won’t be happening this year.

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Teradata may be making headlines for its decision right now, but it’s not the first company to put AI investment over employees’ salaries.

Another tech company called TTEC recently announced that it would stop matching its employees’ 401(k) contributions for the rest of the year to afford its vision for AI. Interestingly, TTEC describes itself as being the “best” in “humanity and technology.” It sounds like they might have left half of the equation behind.

ResumeBuilder surveyed 866 companies and found that 54% of them planned to cut wages in some way so they could use that money on AI. As AI’s role in business becomes increasingly important, this trend is likely to continue in a big way.

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However, workplace strategist Jennifer Moss told Business Insider that companies aren’t left without any option other than to cut their employees’ pay to afford AI. There are other ways to come up with the money, but funds allocated for salaries is the "largest controllable expense line at most companies and the one with the least organized resistance.”

Alphabet proved there are other routes to take when it sold $80 billion of its stock to finance its AI investments, but most companies don’t seem particularly interested in doing something similar.

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This shift away from putting employees first could be a sign of what companies expect the future to look like.

Research has repeatedly shown that people’s well-being is closely tied to their work environment. A positive work culture can boost workers’ physical health, which in turn makes them more productive and better at their jobs.

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It would be difficult to make the argument that any big corporation ever truly treated its workers with the care and respect they deserve, but taking money away from employees and spending it on the very technology that could replace them feels like a new low. But maybe that’s the point.

The Boston Consulting Group estimated that 10% to 15% of jobs could disappear because of AI. If business executives are counting on those numbers being accurate, or perhaps even expecting the reality to be higher, they’ll see no need to work on employee retention by doing things like offering raises. After all, they won’t need actual employees anymore.

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Mary-Faith Martinez is a writer with a bachelor’s degree in English and Journalism who covers news, psychology, lifestyle, and human interest topics.