McKinsey froze entry-level salaries for the third straight year. Starting pay sits at $135,000 for college grads and $270,000 for MBAs. The official explanation? AI is automating their work.

That’s only half the story.

“Organizations are using the AI revolution to pad the fact that they’re freezing salaries,” says Cynthia Abbott Kerr, founder of WellPay.ai, a compensation strategy firm. The real issue runs deeper. Companies have spent decades paying premium rates for 12-month consulting engagements. Now they’re asking: Can we get faster answers with AI-assisted analysis?

The answer is yes. And that shift reveals something critical for every CHRO heading into 2026.

Compensation strategy isn’t about matching market data anymore. It’s about rebuilding trust in a market where employees run their offer letters through Claude before deciding whether to engage. It’s about designing pay structures that show progression, not just paychecks. And it’s about having hard conversations now, before the market shifts and retention becomes your biggest liability.

In the latest episode of the The Human Capitalist Podcast, we get into what actually matters.

📺 Watch the episode here: https://youtu.be/sUKSUtTCOzI

Pay Transparency Is No Longer Optional

The data is clear. Candidates want compensation on the job description before they apply.

Not a range that spans $40,000. Not a “competitive salary” placeholder. The actual number.

“I’ve fallen in love with a job description, spent an hour on the phone with the recruiter, and then found out it’s $30,000 less than what I’m making,” says Trent Cotton, host of the Human Capitalist podcast. “That’s a waste of my time, a waste of the recruiter’s time, and it takes away from actually finding someone who can take the role.”

Hiding compensation doesn’t protect you. It signals distrust. And in a market where trust between employers and employees has hit an all-time low, that signal matters.

Gen Z candidates are opening retirement accounts on day one. They’re not asking “What can you pay me right now?” They’re asking “How does this impact my future? How do I progress from director to senior director to VP?”

That generational shift changes everything. Compensation becomes a narrative about career architecture. When you can show the progression path, the equity structure, and the long-term safety net, you’re no longer managing a cost center. You’re building retention machinery.

The organizations winning in 2026 won’t hide their numbers. They’ll use transparency as a competitive advantage.

Equity Compensation Deserves More Attention

The largest 401k providers are preparing for something most HR leaders haven’t discussed yet.

If tariffs pull back and rate cuts materialize in 2026, capital will flood the market. That creates hiring opportunities and wage pressure that many organizations haven’t staffed for. The conversation has shifted from “How do we maintain our budget freeze?” to “How do we ensure we don’t experience talent flight?”

This is where equity compensation matters according to Cynthia.

“Organizations are looking at how to stay competitive without going beyond the pool that has been allocated. Lots of thoughtful design, lots of thoughtful planning.”

One persistent challenge: leaders hate market data. “In a good market, nobody likes the data. In a bad market, nobody likes the data,” she notes. “Just accept you don’t like the data and move forward.”

The better move is to be thoughtful now, even with a prescribed budget. Design equity programs that create long-term stakes. Show employees how their compensation grows. Give them a reason to stay when the market heats up.

Base salary freezes may be defensible in a stagnant market. But they’re a liability in an expanding one. The organizations that prepare now by building equity structures and communicating progression paths won’t scramble when competitors start hiring again.

AI Governance Needs Humans in the Loop

We discuss some of the litigation in the market around AI and bias. Cynthia believes strongly this is where HR can and should take the lead.

“HR can be really driving the governance policy of how our organizations utilize artificial intelligence. Buying something and turning it on and saying, ‘All right, there’s AI, there’s our AI policy’—that’s going to lead to disaster.”

Practical steps:

Prompt the AI with the questions your workforce will ask. Understand what answers come back during performance reviews and compensation conversations. Participate in those answers so employees don’t get a different story from their manager than they get from Claude.

Be brutally honest about what AI can and can’t do. AI can surface candidates who meet core job requirements. AI cannot interview. AI cannot assess cultural fit. AI cannot replace judgment from experienced talent professionals.

Audit regularly. You inspect what you expect. Treat AI like another employee. Do performance checks. Make sure it does what it claims to do.

Organizations that cut their talent acquisition teams during downturns are now deploying AI recruitment without the professionals who understand how to translate between candidate signals and job fit. That gap is where the doom loop lives.

Get those roles and boundaries clear now, before you’re explaining to the board why retention dropped.

Why you should watch

The market will shift in 2026. The data suggests it. The large retirement plan administrators are planning for it. When it does, compensation strategy, AI governance, and hiring quality will determine whether you’re prepared or scrambling.

Cynthia's insights on everything from current events to her very practical and unfiltered approach to compensation in 2026 is all the reason you need to spend thirty minutes watching the full episode.