60% of Indian Employers to Use AI for Salary Benchmarking and Employee Rewards by 2028 | EY Report

Introduction

Artificial Intelligence (AI) is revolutionizing how businesses handle salary benchmarking, employee rewards, and compensation strategies. According to the EY Future of Pay 2025 report, around 60% of Indian employers plan to integrate AI into these processes by 2028.

With an average salary increase of 9.4% expected in 2025, companies are moving beyond traditional pay models. AI-driven compensation tools now enable real-time pay adjustments, predictive analytics, and personalized incentives, ensuring fair and competitive salaries for employees.

In this blog, we’ll explore how AI is transforming salary decisions, which global companies are leading the charge, and the future of AI-driven compensation.

Why Are Companies Using AI for Salary Benchmarking?

Traditional salary benchmarking was slow, manual, and often outdated by the time pay adjustments were made. AI is changing the game by offering real-time, data-driven compensation models that align with market trends.

Key Benefits of AI in Salary Benchmarking:

• Real-Time Pay Adjustments – AI monitors job market trends and suggests salary changes instantly.
• Personalized Compensation – AI tailors salaries and benefits to individual employee skills and performance.
• Pay Equity & Fairness – AI detects and removes biases in salary structures, ensuring equal pay for similar roles.
• Predictive Insights – AI forecasts future salary trends, helping companies plan ahead for pay raises.

Which Companies Are Using AI for Salary Benchmarking?

Amazon – AI-powered payroll & workforce optimization

Amazon uses machine learning algorithms to optimize employee salaries and automate workforce management. AI helps Amazon adjust wages based on job roles, performance metrics, and location-based pay scales.

Google – AI-driven pay equity analysis

Google has implemented AI-powered tools to analyze gender and racial pay gaps. The company uses AI to ensure equal pay for equal work and adjust salaries based on industry benchmarks.

Microsoft – AI-powered performance-based compensation

Microsoft employs AI for real-time salary adjustments and personalized employee rewards. AI helps determine bonuses, promotions, and salary hikes based on performance metrics and industry trends.

Tesla – AI-driven incentive structures

Tesla uses AI to analyze employee performance and productivity, ensuring competitive pay structures. AI helps identify top talent and offers stock-based incentives to retain employees.

JPMorgan Chase – AI for financial sector compensation

JPMorgan Chase utilizes AI to predict salary trends and personalize financial incentives for employees. AI-driven data analytics optimize bonuses, stock options, and retirement benefits.

Infosys & TCS (Indian IT Giants) – AI-powered workforce analytics

Leading Indian IT firms Infosys and TCS use AI to analyze market salaries and upskill employees based on future job trends. AI also plays a crucial role in retention strategies by predicting attrition risks.

Real-World Scenario: AI in Salary Adjustments

Case Study: A Tech Firm Uses AI to Reduce Employee Turnover

A global IT company was struggling with high employee attrition due to non-competitive salaries. Manual benchmarking took months, causing delays in salary adjustments.

How AI Helped:

• AI-based salary benchmarking compared salaries with real-time market data from LinkedIn, Glassdoor, and job postings.
• Personalized pay raises were suggested for high-risk employees before they resigned.
• Performance-based compensation was assigned automatically using AI-driven insights.

Impact:

• 30% drop in employee attrition
• Salary adjustments completed in real-time instead of quarterly reviews
• Higher job satisfaction and engagement

Industry Trends: AI-Driven Salary Growth (2025 Projections

E-Commerce & Financial Services Leading Salary Growth

• E-commerce salaries are projected to increase by 10.5% in 2025, driven by the rise in digital commerce and AI-powered automation.
• Financial services (banking, fintech) will see a 10.3% hike, fueled by demand for cybersecurity experts and AI-driven banking solutions.

AI in IT & Global Capability Centers (GCCs)

• Global Capability Centers (GCCs) will witness 10.2% salary growth in 2025, as companies expand AI investments.
• IT services salaries will see slower growth, declining from 9.8% in 2024 to 9.6% in 2025, due to automation and cost-cutting.

Changing Employee Priorities: AI-Driven Flexibility & Rewards

• 90% of employees prefer hybrid work models – AI helps companies design flexible compensation structures.
• 50% of employers report a rise in gig and freelance work – AI-driven pay platforms help manage variable salaries.
• 65% of companies believe flexible work options improve talent acquisition – AI helps match pay with remote work models.

Stock-Based Incentives & AI-Driven Compensation

• Stock-based incentives (ESOPs, RSUs, SARs) have increased from 63% in 2020 to 75% in 2024.
• AI helps personalize stock compensation based on employee tenure, role, and performance.

CEO Compensation Trends: AI’s Role in Executive Pay

Performance-Linked CEO Salaries

• CEO salaries in Nifty50 companies surged by 18-20% from 2023 to 2024.
• 70% of CEO pay is now linked to business growth, ESG goals, and long-term sustainability.

AI-Driven Leadership Selection

• AI helps companies analyze CEO performance across industries, ensuring better executive hiring decisions.
• 40-45% of CEO transitions in the last five years have been internal promotions, optimized by AI-driven career tracking.

Future of AI in Salary & Compensation (2025-2028)

AI-Powered Salary Predictions

• AI will enable continuous salary adjustments instead of annual raises.
• AI will help companies predict talent shortages and adjust salaries to stay competitive.

Blockchain & Smart Contracts for Payroll

• AI & blockchain will automate cross-border payments, reducing delays and fraud.
• Smart contracts will ensure instant payroll processing, especially for freelancers and gig workers.

AI-Based Upskilling & Compensation

• AI-driven learning platforms will recommend pay raises based on skill development.
• Employees will get incentives for completing AI-recommended training programs.

Conclusion: AI is Reshaping Compensation Strategies

AI is revolutionizing salary benchmarking, pay structures, and employee benefits. Companies using AI retain top talent, ensure pay equity, and optimize compensation decisions in real-time.

With AI adoption growing, businesses that embrace smart compensation strategies will have a competitive edge in the evolving job market.

What Do You Think?

Do you believe AI will improve salary fairness in the workplace? Share your thoughts in the comments!

Frequently Asked Questions (FAQs)

What is AI-driven salary benchmarking?

AI-driven salary benchmarking uses artificial intelligence to analyze market trends, employee skills, and industry standards to determine competitive salaries.

How does AI improve salary and compensation strategies?

AI helps companies adjust salaries in real time, eliminate pay gaps, and personalize compensation based on employee performance and job roles.

Why are Indian employers adopting AI for salary decisions?

Indian employers are adopting AI to improve pay transparency, optimize salary structures, and offer better rewards to attract and retain talent.

What percentage of Indian companies are using AI for salary decisions?

According to the EY Future of Pay 2025 report, 60% of Indian employers plan to use AI for salary benchmarking and compensation strategies by 2028.

How does AI help in pay equity?

AI analyzes salary data across different demographics to identify and eliminate unfair pay gaps based on gender, experience, and location.

Which industries are seeing the highest salary growth in 2025?

The e-commerce sector is expected to see a 10.5% salary increase, followed by financial services at 10.3% and global capability centers (GCCs) at 10.2%.

Will AI replace HR professionals in salary decisions?

AI will not replace HR professionals but will assist them by providing data-driven insights, automating repetitive tasks, and improving decision-making.

How does AI personalize employee compensation?

AI considers employee performance, skill level, job market trends, and company goals to offer customized salary and benefits packages.

What role does AI play in employee retention?

AI helps companies identify employees at risk of leaving and offers proactive salary adjustments, bonuses, or career development plans to retain them.

Which global companies are using AI for salary benchmarking?

Companies like Amazon, Google, Microsoft, Tesla, JPMorgan Chase, Infosys, and TCS use AI to optimize employee compensation.

How does AI impact salary increments in different sectors?

AI-driven salary predictions help businesses offer competitive raises, with high-growth sectors like e-commerce and fintech seeing the most significant increases.

What is real-time pay adjustment, and how does AI enable it?

Real-time pay adjustment uses AI to track market trends and employee performance to update salaries instantly instead of waiting for annual reviews.

How does AI help companies manage compensation costs?

AI optimizes salary budgets by ensuring fair pay structures, preventing overpayment, and aligning salaries with industry standards.

What is the impact of AI on CEO compensation?

AI is influencing CEO pay by linking 70% of executive compensation to business growth, ESG goals, and company performance.

How does AI contribute to stock-based employee incentives?

AI helps companies design stock-based compensation plans like ESOPs and RSUs by predicting employee performance and retention rates.

What is the connection between AI and gig work salaries?

AI platforms help manage gig worker payments by calculating fair wages based on work type, experience, and market demand.

How does AI-driven salary benchmarking help startups?

Startups use AI to stay competitive by setting fair salaries based on real-time industry trends without needing large HR teams.

Can AI prevent salary discrimination in the workplace?

AI eliminates human bias by using objective data to determine salaries, ensuring fair pay for all employees.

What is predictive salary analytics, and why is it important?

Predictive salary analytics use AI to forecast future salary trends, helping businesses plan compensation budgets more effectively.

How is AI transforming salary structures in IT companies?

AI-driven automation is slowing salary growth in IT, with increments dropping from 9.8% in 2024 to 9.6% in 2025 due to efficiency-focused hiring.

What challenges do companies face when implementing AI in compensation?

Companies may face challenges like data privacy concerns, AI bias, integration issues, and resistance to technology adoption.

How does AI-powered learning impact salary growth?

AI-driven learning platforms recommend salary increases based on employee skill development and training completion.

What role does AI play in performance-based pay?

AI analyzes employee contributions and assigns performance-based salary increases, bonuses, and promotions.

How does AI support HR leaders in salary decisions?

HR leaders use AI to access real-time salary benchmarks, predict employee needs, and create data-backed compensation strategies.

How is AI used in cross-border payroll management?

AI simplifies international salary payments by automating currency conversion, tax calculations, and compliance checks.

What is the impact of AI on employee satisfaction?

AI-driven salary adjustments, fair pay structures, and personalized rewards lead to higher job satisfaction and engagement.

How does AI help businesses plan for future salary trends?

AI analyzes economic conditions, industry shifts, and talent demand to predict future salary hikes and hiring costs.

What role will AI play in salary benchmarking between 2025 and 2028?

AI adoption in salary benchmarking will increase, with companies shifting from manual pay models to AI-driven real-time compensation strategies.

What is the future of AI-driven salary and compensation strategies?

AI will continue to enhance salary decisions by integrating with blockchain for secure payroll, automating real-time pay adjustments, and improving employee rewards.