AI isn't just coming for your job. It's coming for your pay.

As companies look for cash to fund their AI transformations, some are finding it by shrinking employee benefits and compensation packages.

Teradata, a global cloud software company, told its 5,100 employees in January not to expect an annual salary raise this year as it reallocates the budget toward AI investments, according to an internal memo seen by Business Insider and not previously reported.

Teradata's focus for 2026 is to "win in the market with AI," CEO Steve McMillan said in the memo, and to help achieve that, the company will be increasing investment in AI talent and expertise.

"We will fund this AI investment by reallocating the budget from 2026 annual salary adjustments," said McMillan.

Teradata did not comment on the budget decision. A spokesperson told Business Insider that the company is actively investing in AI to innovate its products and services.

Two US-based Teradata employees, both of whom have been at the company for over 10 years, told Business Insider they generally received annual salary increases of 2% to 4%, though they said the increases were not guaranteed each year.

Employees may still receive performance-based bonuses and equity shares as part of their compensation, the memo said. The decision applies to employees in countries where regulators do not require market-aligned salary adjustments.

Teradata is the second company that Business Insider has reported is openly telling staff it is pursuing AI spending over workforce investment.

TTEC, a midsize technology and services firm, recently paused 401(k) matches for its US employees through the end of 2026, saying in internal communications that the benefits retreat would help fund the tools, training, and capabilities necessary for the company's AI future.

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The candor with which leaders are naming AI as the reason for cuts marks a new rhetorical shift, said Jennifer Moss, a workplace strategist and the author of "Why Are We Here? Creating a Work Culture Everyone Wants."

"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."

Financing an AI transformation

TTEC and Teradata are technology services companies operating in an industry where failure to adapt to AI is seen as a particularly existential risk. Across industries, businesses are increasing their AI spending.

A recent CIO survey from RBC Capital polled 117 IT professionals at companies with annual revenues from under $250 million to more than $25 billion. It found that 90% of those surveyed planned to increase AI spending in 2026.

AI spending can range from tens of thousands of dollars for small pilots or basic integrations to millions of dollars for enterprise-scale AI transformations. Those costs are hitting as many companies are already operating with tighter budgets, driven by inflation, tariffs, and supply chain disruptions.

Teradata and TTEC have both faced financial difficulty in recent years, with global revenue declining 5% and 3.2%, respectively, in each company's latest financial year.

While AI costs may be rising, cutting worker compensation is a choice, not an inevitability, Moss told Business Insider.

Transformations can be financed through measures like taking on debt, reallocating nonessential spending, adjusting executive compensation, making acquisitions, phasing investments over time, or accepting lower margins for a defined period, she added.

Alphabet, for example, announced this week that it plans to sell $80 billion in stock to fund its investments in AI infrastructure.

"The reason workforce compensation ends up being the source is that it's the largest controllable expense line at most companies and the one with the least organized resistance," said Moss.

The actual cost of AI investment for most companies is relatively small compared to total compensation expense, she added.

According to BCG's 2026 AI Radar, a survey of 2,360 global companies that was released in January, companies only expect to spend about 1.7% of revenue on AI in 2026.

Jan-Emmanuel De Neve, an economist and director of Oxford University's Wellbeing Research Center, told Business Insider he expects more companies to make similar trade-offs as they pursue AI, saying it is indicative of a "short-term mindset."

"When leaders openly cut human compensation to fund AI, they are trying to project decisive, tech-forward management. However, the actual message traveling to the workforce is that they do not have a secure future in the organization," De Neve said.

Employees are losing power

Cuts to benefits and salary adjustments sit at the gentler end of the spectrum. Others have tied AI adoption to layoffs and fewer hiring opportunities.

Meta, for example, laid off 10% of its workforce in May, a move it linked to a push for efficiency and the need to fund investments.

Meta's stock price has surged in recent years, and in January, the company said its capital spending for the year would range from $115 billion to $135 billion.

Other firms, including Snap, Cisco, and Salesforce, have also announced staff cuts, citing AI efficiencies as a rationale; and Uber CEO Dara Khosrowshahi said in May that he'll cover the cost of increasing AI investment by hiring fewer people.

Teradata's head count has fallen by over 21% since December 2023, a drop of 1,400 people that the company said was made to support its growth strategy, company filings show.

Ellen Raim, an employment attorney with 30 years of corporate HR leadership experience, told Business Insider that many companies are leaner and under increasing organizational pressure to show productivity gains and stronger head count ROI.

"AI is being positioned as a way to do that quickly," she said.

Bill Winters used the phrase "lower-value human capital" to refer to employees he was planning to lay off. Bloomberg/Getty Images

Many workers have struggled with a perception that AI could lead to their well-being being sidelined, something recently reinforced when Standard Chartered CEO Bill Winters described some roles as "lower value, human capital." Winters later apologized. Alongside the growing tide of layoffs and examples of AI-focused compensation cuts at TTEC and Teradata, the power balance is shifting against workers as companies prioritize their AI futures.

Comments like Winters' reflect a broader trend of executives talking about people primarily as costs or capacity, Raim said. "That may make sense on a spreadsheet, but it can be corrosive inside an organization."

The risk, Raim said, is that companies underinvest in employees and undermine trust, at the very time they ask them to embrace these new tools and help figure out where AI can meaningfully improve the business.