Payscale Inc., the leading provider of compensation intelligence solutions, has officially published the results from its 2025 Pay Confidence Gap Report, which revealed a significant disconnect between employers and employees in the context of salary expectations.
Going by the available details, the stated disconnect is understood to stem from pay misinformation as a large chunk of employees were found to use AI assistants like ChatGPT for compensation insights. To be more specific, 70% of employers have noticed a rise in employees using AI to shape salary expectations.
As a result, 27% of AI-using employees said it inflated their expectations compared to other sources, and 38% of employers agreed AI tools are driving salary demands higher than ever before.
More on the same would reveal how social media platforms like TikTok, Reddit, Instagram, and Facebook are also major drivers of unverified salary information. We get to say so because literally one in every five employees (19%) are using these platforms for their salary research.
Talk about the whole report on a slightly deeper level, we begin from how 63% of HR and business leaders have seen an increase in employees making salary requests based on inaccurate or unverified data in the last year. This has caused a major disagreement to develop, with nearly half (48%) of employers reporting an increase in employee turnover due to salary-related conflicts.
Making this distrust would be the fact that nearly half of employees (41%) said they have never had a transparent discussion with their employer regarding how their pay is determined.
Next up, we must dig into a fact that almost two-thirds (66%) of employees would consider leaving their job if a pay conversation is handled poorly. Against these shifting dynamics, HR leaders are looking for support from leadership on pay decisions (46%), greater pay transparency (44%), as well as reliable, accurate, and up-to-date compensation data insights (42%).
Another detail worth a mention relates to differing priorities between employers and the employees contingent. You see, while employers are more focused on the cost of labor, employees are struggling against the rising cost of living. We get to say so because two-thirds (66%) of employers reported an increase in the number of employees challenging their pay based on the local cost of living in the last year.
Furthermore, almost half (47%) reported internal conflicts over pay differences between employees in different geographies.
The byproduct of that would be 49% employees considering a resignation from their job in the last year because they don’t feel their salary has kept up with the cost of living in their city. On the flipside, 64% of employers were also found to be actively hiring U.S. employees from locations with a lower cost of living to keep salaries down.
In case that wasn’t enough, projected economic uncertainties are set to turn things worse. 53% employers expect pay conversations to become more challenging over the next year due to economic uncertainty. The same is evident in how 33% are already reassessing their pay structures, whereas 32% report being more cautious with pay increases.
On the employees’ side, the report reveals an equally cautious approach to pay conversations, as no more than 23% said they are more likely to ask for a salary increase in the current economic climate.
Moving on, employee skills also emerged as a decisive factor in salary negotiations. This translates to how more than two-thirds of employers (68%) say skills shortages have impacted employee bargaining power over the past year. For instance, most (70%) have increased compensation beyond typical pay ranges to attract or retain top performers.
Among other things, it ought to be acknowledged that Payscale surveyed 1,000 US employees (aged 18+) and 500 US business leaders, HR leaders, and HR managers to reach upon the published results.
“The avenues for employees to educate themselves on salary expectations are expanding,” said Ruth Thomas, chief compensation strategist at Payscale. “Employees are still gaining knowledge from traditional sources like family and friends and industry salary guides, but AI and social media are driving up salary expectations without the verified data and role context needed to inform compensation.”
