Salary decisions have long been a mix of market research, manager discretion, and—let’s be honest—backroom guesswork. But that’s changing fast. A growing number of companies are turning to AI-powered compensation tools to set salaries, benchmark roles, and even help explain pay decisions to employees.
It sounds efficient. It even sounds fair. But is it?
A new report from Business Insider, backed by insights from HR analytics giants like Korn Ferry, Mercer, and Payscale, reveals both the potential and the pitfalls of AI in compensation planning. And the implications go far beyond payroll.
The Quiet Revolution in HR Tech
According to Korn Ferry’s 2025 Total Rewards Pulse Survey, just 22% of companies currently use AI to benchmark external pay—but a whopping 63% are actively exploring it.
At the center of this shift are tools like Payscale Peer and Payscale Verse, which gather compensation data from over 5,000 companies to offer precise salary estimates for even the most niche or emerging roles. For HR leaders trying to fill hybrid, remote-first, or AI-adjacent positions, that kind of intel is gold.
“Sometimes our jobs are really niche, and we have a hard time finding matches,” said Kristen Damerow, an HR pro at architecture firm SmithGroup. “AI has helped surface better comps in less time.”
Why AI is Winning Over HR Teams
This new generation of comp tools doesn’t just spit out numbers. It helps teams:
- Identify salary gaps in real time
- Monitor market changes continuously
- Recommend adjustments before talent walks out the door
- Give managers scripted talking points to explain pay decisions
It’s no longer about annual reviews or static spreadsheets. AI is making compensation a living, breathing process—and that’s a big shift.
“With the talent market moving faster than ever, static comp strategies just don’t work anymore,” says Gord Frost, Global Rewards Leader at Mercer.
The Equity Question: Can Algorithms Be Truly Fair?
But here’s where things get complicated.
Ruth Thomas, Chief Compensation Strategist at Payscale, warns that if AI is trained on historically biased compensation data, it can replicate or even amplify inequity. That means if women or minority workers were underpaid in legacy systems, AI may treat those numbers as a baseline.
To fight this, platforms like Payscale are blending automated outlier detection with manual data audits to catch and correct patterns. But the risk remains: bias in, bias out.
And while AI might offer speed and structure, human oversight is still essential. Especially when the stakes are as personal—and political—as pay.
Transparency, Trust and the Tech Dilemma
Another benefit? Better conversations.
Some AI tools now generate pay rationale summaries for managers to use in 1:1s. That’s a game-changer in organizations where pay discussions have historically been awkward, inconsistent, or opaque.
But it raises a key question: If a manager’s talking points are written by an algorithm, who’s accountable for fairness?
Companies embracing AI-driven comp strategies need to tread carefully. Not just in how they apply the tech, but in how they communicate it to employees.
The Future of Pay Is Smart, Not Autonomous
AI may be reshaping compensation—but it’s not replacing the need for strategy, context, and empathy.
The most successful organizations won’t hand the reins entirely to software. Instead, they’ll use AI to enhance human decision-making, close equity gaps, and offer a faster, clearer path to competitive pay.
Because at the end of the day, salary isn’t just a number. It’s a signal of value, trust, and opportunity. And no algorithm can calculate that on its own.
