Should AI Determine Your Pay?

It was a question the hiring manager wasn’t expecting, and one that he wasn’t sure how to answer: Had AI determined the amount of the salary offer? 

People may worry about AI taking their jobs, but they’re increasingly comfortable allowing the technology to handle a critical part of their work life: pay decisions.. So much so, in fact, that a new survey says two-thirds of job candidates are more likely to accept a job with a firm that uses AI for pay decisions than one that doesn’t. Even more telling, one out of three employees trust AI over their managers to decide compensation, believing the technology to be more objective and transparent in making decisions. “Employees see AI as a way to make pay decisions fairer,” says Tom McMullen, a senior client partner and the leader of the North America Total Rewards practice at Korn Ferry.  

McMullen says employees are starting to see AI as a replacement for salary negotiations. They also consider it to be a way to mitigate managerial bias, because it uses large datasets to benchmark performance-related raises, promotions, and pay. That’s especially true for women and other underrepresented groups, who are actually using AI to think through their approach to pay-inequity issues, says Stephen Lams, a senior vice president of data and analytics in the Korn Ferry Institute. “People see AI as a ‘safe space’ to ask questions about pay they might normally not want to discuss with a colleague or manager,” says Lams. On the firm side, more companies are relying on AI-driven pay processes to attract top talent. A recent Korn Ferry survey found that about 50% of organizations either have, or are developing, AI processes for supporting compensation decisions.  

Critics warn, however, that trusting AI to determine pay may be a mistake. For starters, AI can only reduce bias in compensation decisions if the data it is trained on is unbiased, says Tanyth Lloyd, global vice president of technology and transformation at Korn Ferry. Employees and job candidates using AI to level the playing field on pay should also be wary, says Daisy Grewal, a director of analytics innovation and automation at Korn Ferry. “AI could end up giving worse or slightly discouraging advice to a woman consulting with it about pay issues versus a man,” she says. 

For now, employees and job candidates still want managers and people leaders involved in compensation decisions—but by an increasingly narrow margin. While one-third of employees say AI should decide pay disputes, twice as many, or 66%, would prefer a manager to do so. Moreover, no one wants human beings to be excluded entirely from the pay-determination process. To be sure, only 39% of people are willing to allow AI to decide half of their pay. “The model employees seem to trust the most is one where AI provides the guardrails and managers make the final call when something doesn’t feel right,” says McMullen. 

Learn more about Korn Ferry’s Total Rewards capabilities. 

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