'Trust risk' | How AI adoption is forcing employers to rethink performance-based pay

The rise in AI usage is disrupting pay for performance models, bringing fresh challenges around how organizations define, measure, and reward contribution.

Kayla Velnoskey, Director, Analyst at Gartner, said: “Effective pay for performance relies on three foundational elements: a clear philosophy, fair assessment, and meaningful differentiation.”

As AI becomes embedded in workflows and performance management, it is both adding efficiencies and amplifying existing weaknesses.

Velnoskey said: “AI threatens these foundations by amplifying longstanding challenges, such as introducing new ambiguity around what should be rewarded, increasing the risk of inconsistency and bias in AI-supported performance evaluations, and complicating already tight compensation decisions.”