The world of work is shifting at an unprecedented pace.
Advancements in technology, evolving regulatory requirements, and rising employee expectations are transforming the way organizations design and deliver total rewards. At the same time, total rewards teams are expected to navigate these increasing complexities with fewer resources and tighter budgets. The challenge ahead will be for organizations to find ways to remain competitive, fair, cost-conscious and employee-centric in an environment defined by rapid and continuous change.
Technological change
Not long ago, compensation practices relied heavily on cultivated human expertise.
Professionals learned through apprenticeship-style development, slowly building the technical and judgment-based skills that allowed them to interpret market data within the context of an organization’s culture, strategy, and affordability. Annual compensation surveys created predictable cycles that dictated when benchmarking, assessment and program design took place. Human interpretation and organizational nuances were central to the process.
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Technology, especially artificial intelligence, has dramatically altered the compensation landscape. In recruiting, AI now generates job descriptions, screens applicants and builds shortlists. While efficient, these tools risk weakening human resources’ understanding of the true scope and required technical expertise of what roles actually involve, introducing bias and producing job postings that may lack precision or relevance.
In benchmarking, AI-driven salary data is widespread, but often unverifiable or inconsistent. Job titles may not align across companies, and self-reported salary information, particularly when influenced by emotion, as on platforms like Glassdoor, may distort expectations. Employees increasingly rely on these tools, often resulting in unrealistic perceptions of market value or compensation mix.
Meanwhile, total rewards functions have grown leaner. With fewer seasoned practitioners and greater reliance on AI tools, junior professionals have fewer opportunities to develop foundational expertise. The field is beginning to show early signs of a widening knowledge gap.
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As AI becomes more integrated, early-career compensation roles will likely shift away from purely analytical work toward responsibilities like program delivery, change management, and stakeholder engagement. These expectations may prove challenging without years of technical practice to build judgment and confidence. Compensation has always been a blend of science and art. While AI may support the science, the art — contextualization, nuance, influence, and organizational sensitivity — remains human. Protecting this element will be essential to remain strategic.
Regulatory change
Historically, compensation programs operated with relatively minimal oversight beyond basic employment standards.
Aside from pay equity requirements in certain provinces and specific rules in the public sector, organizations were largely free to design compensation structures as they saw fit.
Regulatory expectations have expanded rapidly. Pay equity legislation, increased provincial pay transparency requirements, and rules limiting how organizations can describe or assess candidate experience, such as prohibitions on listing required years of Canadian work experience in Ontario, for example, are reshaping hiring practices. At the same time, emerging AI regulations require organizations to disclose when AI is used in screening or decision-making. Additional expectations like the 45-day rule for candidate feedback adds new layers of accountability.
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Beyond legislation, social expectations around fairness and transparency continue to intensify. Employees increasingly expect insights into pay decisions, equity and competitive positioning. This growing pressure adds administrative burden and complexity, particularly for total rewards teams already operating with reduced resources.
As salary ranges become more visible to the public, the foundation of traditional benchmarking may shift. Some employers may be tempted to rely more heavily on publicly-available online information to assess external pay levels, but this carries risks, including the loss of deeper insights that structured surveys provide on compensation mix, progression and design.
Greater transparency will also erode certain competitive advantages as pay ranges once considered proprietary become public. Organizations with strong compensation frameworks and a well-articulated employee value proposition may benefit from this openness, while those with inconsistent practices may find themselves exposed.
The key will be to let regulatory change guide total rewards strategy rather than control it. Transparent communication about what is changing, why it matters and what employees can expect will determine whether organizations strengthen or weaken trust in this new era.
Design and delivery of total rewards: balancing cost, expectations and well-being
Historically, compensation programs were more transactional and predictable. Most organizations operated around a single annual cycle that determined merit, adjustments and bonuses. Compensation was treated as a ‘black box,’ allowing leaders flexibility in their decision-making and avoiding constant comparison among employees. Programs had limited customization, and leaders were generally more comfortable delivering difficult news, such as salary freezes or below-target bonuses.
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Today, organizations must balance financial restraint with increasingly ambitious employee expectations. Cost containment has become essential as employers respond to economic uncertainty and margin pressure.
Recent years of elevated merit budgets have contributed to expectation inflation, with employees, especially early-career talent, assuming that year-over-year increases should always remain high. Bonus programs have also shifted in perception — many employees now view target bonuses as guaranteed income rather than at-risk compensation tied to performance.
Demand for rapid career progression adds further pressure, as promotion expectations often outpace organizational capacity or philosophy. Clear communication about career frameworks and typical time horizons as it relates to future promotions have become crucial.
At the same time, employee well-being increasingly depends on clarity. When employees understand how pay decisions are made, what factors influence outcomes and why certain decisions occur, they experience greater psychological safety. Performance management also remains a challenge, as consistently inflated ratings reduce meaningful differentiation between employees. When most employees are rated as high performers, pay-for-performance signals are weakened, making it harder to justify varied compensation outcomes and reinforcing unrealistic expectations for year-over-year pay increases.
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The emphasis on employee experience will continue to grow and compensation must be reframed within that context. Organizations will need to define what well-being means for their workforce and acknowledge that above-market pay isn’t a sustainable strategy. Instead, well-being may be better supported through fair pay, living wage strategies, predictable processes and proactive communication.
Avoiding surprises, whether in merit budgets, scorecard performance or bonus forecasts, will be critical to maintaining trust. Sustainable compensation programs will require ongoing recalibration to ensure alignment with both business strategy and employee needs.
Even as budgets tighten and compensation programs become more restrained, employee expectations around experience continue to grow. To meet these expectations, organizations will require leadership who are willing to have difficult conversations and set realistic boundaries. Clarity about what the company will and won’t offer is essential. Organizations that succeed will be those that embed communication, education and transparency into their total rewards philosophy. In this environment, communication becomes the core value that total rewards delivers.
The year ahead
The coming year will require total rewards leaders to balance AI efficiency with human expertise, navigate expanding regulatory expectations, manage heightened employee demands in a constrained environment, and design sustainable programs that support both performance and well-being. Transparency will become a differentiator rather than a threat, and communication will transition from a support tool to a strategic capability.
2026 will demand clarity, balance and strong communication from total rewards leaders. Organizations must embrace technological change without losing the human judgment that gives compensation its nuance. They must adapt thoughtfully to new regulations while reinforcing fairness and transparency. And they must design programs that support both organizational performance and employee experience.
Ultimately, success will depend on honest dialogues, strong frameworks, and a renewed focus on the human side of compensation, because even as tools and regulations evolve, people remain at the centre of every total rewards decision.
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