The AI Performance Pay Shocker
What's In/Out in 2025
Welcome to the Culture Edit.
This is part of our series of predictions on what’s in and out for the upcoming year.
Get ready for a major shake-up in how we get paid at work. The salary and hourly system that’s been in place for generations is going to start to get a makeover in 2025, and AI is the catalyst. While performance-based pay isn't new for sales teams, it's about to pop up in some unexpected places—think accounting, HR, and admin roles.
Here's what's driving this shift: AI is making employees more productive, but companies are scratching their heads about how to keep people innovating and going the extra mile. The solution they're betting on? Tying pay directly to performance, and they will soon have the tech to make it happen. AI tools will track and measure work in ways we've never seen before, creating detailed pictures of who's delivering above and beyond (and who’s not).
For folks who've built their careers around steady salaries, this will be a HUGE mental shift. For the typical employee working in a large corporation, the idea of their paycheck fluctuating month to month based on their output is a scary proposition. (Not so much for entrepreneurs and service providers – we know). With AI systems capable of setting targets and tracking progress on a daily basis – this will be the case very soon.
It's the biggest change in how workers will be paid since the Industrial Revolution.
For the “Is it legal?” crowd - under the Fair Labor Standards Act, employers must ensure their pay systems meet minimum wage requirements even during lower-performing periods. For exempt (salaried) employees, performance-based pay structures need to satisfy the salary basis test—meaning a guaranteed base salary of at least $684 per week that doesn't fluctuate based on quality or quantity of work. Smart organizations adopting this strategy will structure these new systems as base-plus-bonus arrangements to stay compliant while still incentivizing performance.
Like every major workplace shift, culture will make or break this transition. Companies that nail it will not just roll out new pay structures—they will build environments where people understand how they're measured and feel supported in adapting to this new world. They will make authentic communication a primary priority (and goal) for leaders and provide clear paths and tools for skills development.
Prediction: The winners won't be the companies with the fanciest AI work tracking tools, but those who pair performance pay with strong leadership and clear communication. Without the culture piece, it's another policy change that will shift back after not achieving the desired result of innovation and discretionary effort.
This shift will not happen overnight, and widespread adoption any time soon. But we predict that some organizations will start testing it in 2025. The results and subsequent attention they get will drive whether or not this becomes the next hot item in people strategy.
What do you think?
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