The leading provider of compensation intelligence solutions, Payscale Inc., has officially published the findings of its 2025 Pay Confidence Gap Report, which revealed a significant gap in salary expectations between employers and employees. 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 consequence of this, 38% of employers agreed that AI tools are driving salary demands higher than ever before, and 27% of AI-using employees stated that it inflated their expectations in comparison to other sources. 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.
If we want to delve a little deeper into the entirety of the report, let's start by discussing how 63% of HR and business leaders have observed an increase in the number of employees requesting salary increases based on data that is either unverified or inaccurate. Nearly half (48%) of employers have reported an increase in employee turnover as a result of salary-related conflicts as a result of this. 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, we have to look into the fact that almost two-thirds of employees, or 66 percent, would consider quitting their jobs if a discussion about pay was 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 are entitled to say so due to the fact that two-thirds (66%) of employers reported a rise in the number of employees challenging their pay based on the cost of living in their area over the previous year. In addition, almost half (47%) of respondents reported internal disagreements regarding pay disparities among employees working in different regions. As a result, 49% of workers have considered quitting their jobs in the past year because they believe their pay has not kept up with the cost of living in their city. On the other hand, it was found that 64% of employers were actively hiring U.S. workers from areas with lower cost of living in order to lower salaries. 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.
Only 23% of employees said they are more likely to ask for a salary increase in the current economic climate, indicating an equally cautious approach to pay discussions. 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.”
