Employee Compensation Is Entering a New Era. Many Companies Are Still Operating With Old Assumptions

By Gerry Murphy

Image: PAVE Compensation Forum San Francisco - by Alex Cwirko-Godycki

Being part of the conversations hosted by Pave - such as the recent PAVE Compensation Forums in San Francisco and NYC - is always an honor, a pleasure, and an eye-opener.

What makes these discussions so valuable is the mix of perspectives in the room. At Nua Group, we bring insights from the day-to-day work happening directly with clients: the challenges organizations are facing right now around compensation, job architecture, attracting and retaining AI talent, equity, scaling, and governance. PAVE brings an incredible depth of market data that helps validate trends, challenge assumptions, and give context to what companies are experiencing on the ground. And compensation and HR leaders in the room openly share what is working, what is not, and where they are still struggling.

Across both the San Francisco and New York forums, one thing became very clear: compensation is entering a new phase. The market is moving quickly, and expectations are shifting, while many organizations are still operating with structures, processes, and assumptions built for a very different market.

Below are some of the biggest themes that consistently surfaced throughout the discussions.

1. Companies Are Overestimating Their AI Talent Problem 

Compensation for AI-related roles dominated many conversations, and one of the biggest takeaways was that many companies are reacting to a talent market they are not truly competing in. A lot of attention is still focused on companies like OpenAI, Anthropic, and DeepMind, where elite research scientists are receiving extraordinary compensation packages, and these headlines are shaping boardroom conversations elsewhere.  

So the first question that needs to be answered is “Are you an Innovator, Integrator or Implementer?”  Most organizations fall into the implementer category, not the innovator category.

But the discussions throughout the forums highlighted an important reality: most organizations are not trying to hire frontier AI researchers. Most are looking for applied AI and machine learning talent that can help improve products, operations, forecasting, customer support, and internal efficiency.

This distinction is important because it changes the compensation strategy significantly (as you can see in the box). Around 83% of AI roles in the market today are applied machine learning positions rather than elite research roles. As a result, many companies are moving toward a more disciplined approach by anchoring AI talent to existing software engineering structures and applying targeted premiums where necessary, rather than completely abandoning compensation frameworks to chase headlines.

Are you an Innovator, Integrator, or Implementor?

2. Job Architecture Has Become One of the Most Important Priorities in HR

Another major theme across both conferences was the growing importance of job architecture.

For years, many organizations treated job architecture as something they could fix later. But between AI, pay transparency, rapid scaling, and tighter budget control, many companies are realizing they can no longer afford to postpone this work.

The discussions highlighted how many organizations are struggling with inconsistent leveling, inaccurate titles, fragmented HR systems, and years of compensation decisions built through exceptions rather than structure. In many cases, companies only realize how unreliable their data has become when they hit a major growth moment like IPO preparation, rapid hiring, or pay transparency requirements.

There was also broad agreement that clean job architecture is becoming essential for effective AI adoption inside HR and Total Rewards. AI tools are only as good as the data behind them, and inconsistent structures quickly create unreliable outputs.

Job architecture is no longer just an HR project; it is a core business infrastructure.  Does your infrastructure work?

3. Equity Programs Are Starting to Lose Their Intended Impact

Another hot topic was equity and whether it still works as intended.

There is growing optimism that the IPO market may reopen more meaningfully in late 2026. But the bigger question is whether equity still feels meaningful to employees, especially in late-stage private companies.

Longer liquidity timelines, underwater options, delayed exits, and weaker post-IPO performance have reduced the motivational impact equity once had. Many employees still do not fully understand how their equity works, from vesting and dilution to tax implications and long-term value. That communication gap is significant.

At the same time, boards are becoming more focused on burn rate and financial discipline, pushing companies to rethink traditional approaches. Some organizations are narrowing equity participation to focus on key talent, while others are exploring cash-based long-term incentives where equity no longer feels compelling.

Rather than continuing with legacy models, many companies are now entering a broader reevaluation of what long-term incentives should look like going forward.

Does equity still attract and retain for your company?

Image: PAVE Compensation Forum NYC - by Alex Cwirko-Godycki

4. Total Rewards really means total rewards

I was struck by the number of companies whose talent pool had diversified significantly and the same old approach to total rewards no longer worked.  In particular, I’ve seen a big uptick in needing to consider the needs of a skilled non-exempt population (think electricians, etc).

The other development in talent pools is how much “traditional industries” are now tapping into technical talent, such as AI and software engineering. There has been a crossover in many ways, and every company is now becoming a tech company. That has enormous implications for total rewards programs.

This has led to needing to consider a whole new set of comparators (including unions or non-traditional competitors), data sources, and ultimately using other rewards.  The importance of benefits, overtime, 401k matches, spot bonuses, etc., and other rewards means companies' total rewards packages are getting more complex and bespoke.

When was the last time you measured the effectiveness of your rewards programs for your entire population?

5. Compensation Communication Is Becoming Just as Important as Compensation Design

Many organizations still underestimate how important communication is within compensation strategy.

Compensation teams spend a huge amount of time building programs, structures, and governance processes. But employees experience compensation through what they understand — or do not understand — about those programs.

Several speakers shared examples of companies reducing employee frustration around pay simply by helping employees better understand the full value of their total rewards, including healthcare, equity, retirement contributions, and other benefits.

\

As compensation becomes more complex through AI premiums, evolving equity models, and pay transparency requirements, clear communication becomes even more important. Employees cannot value programs they do not understand.

Additionally, compensation initiatives are still too often treated as isolated HR projects rather than broader business conversations. The organizations making the most progress are bringing managers, leaders, and employees into those discussions much earlier and with more intention.

Never forget, the pen is mightier than the sword -- are you using communications to deliver value to your employees?

6. The Future of Entry-Level Talent Is Becoming Increasingly Unclear

Many organizations are already reducing entry-level hiring as AI automates some of the foundational work junior employees traditionally handled. At the same time, other companies are continuing to invest heavily in graduate hiring because they recognize that future senior talent still needs to be developed somewhere.  The other emerging reason to hire entry-level talent is culture change -- they are the first truly AI-native generation, and for many companies, they’re the catalyst for change.

The big question is: if companies stop hiring and developing junior talent, where does future expertise come from?

While no one claimed to have definitive answers, there was broad agreement that traditional career paths are likely to evolve significantly over the next few years. Some discussions explored whether early-career development may shift toward broader rotational models, where employees build cross-functional skills alongside AI tools before specializing later on.

The larger takeaway was clear: workforce structures that organizations have relied on for years are beginning to shift, and many companies are only starting to grapple with what that means long term.

Does experience matter anymore?  And if so, how do you develop that?

6. The Companies Navigating This Best Are Focusing on Foundations

Perhaps the biggest takeaway from both PAVE forums was that the organizations handling this period best are the ones strengthening the foundations that others postponed for years.

They are cleaning up data, revisiting job architecture, bringing more discipline to compensation decisions, and thinking more carefully about equity and AI talent strategy. Most importantly, they are recognizing that compensation can no longer sit separately from broader business strategy.

In addition, organizations like PAVE are building toolsets that would be unimaginable only a few years ago. Being able to interrogate your data using AI tools to get to the root causes has become invaluable. But as technology has risen to that challenge, what remains are even more complex issues. The companies investing in strong foundations now will be far better positioned to address these issues and solve for what comes next.

If these are challenges your organization is currently navigating, the team at  Nua Group would be happy to help. Get in touch!