The Year in Total Rewards: What Were the Biggest Trends of 2025?

2025 was anything but mundane for the total rewards (TR) function. In the past 12 months, TR professionals navigated:

Executive orders related to diversity, equity and inclusion (DEI) initiatives, H-1B visas and alternative assets in retirement plans;
Shifting regulations around artificial intelligence (AI) use, labor rules and pay transparency;
Ever-rising healthcare and pharmaceutical costs, particularly around glucagon-like peptide-1 (GLP-1) medications;
An increased focus on burnout, mental wellness and holistic well-being;
The unique priorities of millennial and Generation Z workers, and how to address the needs of a multigenerational workforce; and,
Personalized benefits and modular compensation.

But those were just some of the storylines.

Workspan Daily connected with WorldatWork leaders to get their perspectives on the trends and challenges they feel defined “The Year in TR.”

Access a bonus Workspan Daily Plus+ article on this subject:

In Their Words: WorldatWork Leaders Weigh in on 2025’s Top TR Trends

Pay Transparency

One of the most formative TR trends of 2025 was the continually evolving focus on pay transparency and pay equity. The upcoming requirements of the European Union Pay Transparency Directive and more U.S. states and cities enacting pay transparency legislation made this top of mind for many employers.

“Pay transparency is now tied to trust, belonging and credibility of leadership,” said Elissa C. O’Brien, WorldatWork’s vice president of membership and experience. “Pay equity and job architecture moved from ‘nice-to-have’ to ‘must-have.’ You can’t be transparent without defensible ranges, consistent leveling and clean data.”

O’Brien pointed to three “accelerators” — AI-enabled rewards design, growing skills-based pay and personalized benefits — that will continue to drive broadened pay transparency in 2026.

The reorientation of pay transparency mindsets and strategies ties to not only regulations but employees’ access to pay information through online tools, said Felicia Cummings, the vice president of total rewards at Exelon and a member of WorldatWork’s Compensation Advisory Council.

“Everything is out there — with AI, people have more research tools that they can use to quickly do their own analysis,” she said. “It’s made us total rewards professionals have to really be on top of our game. We can’t just put things out there that suit our story and our narrative. We have to make sure we’re being really thoughtful and have that outside-in perspective, because employees have it now.”

AI Integration

While 2024 was a year of AI experimentation in human resources and total rewards, 2025 was all about AI adoption.

“AI adoption was anticipated given tech innovation, but the speed and depth of AI integration was surprising,” said Sue Holloway, a content director at WorldatWork.

AI is making its way into a variety of business roles and operations, and TR is no exception. Beyond simply using the technology to automate routine tasks, HR and TR leaders are now embedding it into their workflows — using it in a variety of capacities, from assessing compensation bias to supporting the hiring process.

Employees are even using AI to check the work on their pay — and some managers and TR pros are turning to the same tools for strategies to best respond.

“2025 marked a shift from exploration and experimentation to more intentional and focused adoption and integration of AI into total rewards workflows,” Holloway said. “AI moved beyond automating routine tasks to fundamentally reshaping workflows and decision-making.”

Shifting Approaches on Diversity and Equity

In response to U.S. executive orders describing organizational programs traditionally termed “diversity, equity and inclusion,” or DEI, as “illegal” — and building on the 2023 U.S. Supreme Court ruling against affirmative action — a number of prominent organizations shifted away from vocal efforts to promote equitable and diverse workplaces in 2025.

“Many organizations began stepping back from public commitments and took actions to review their policies and practices to ensure legal compliance and avoid being the subject of retribution,” Holloway said.

For some businesses, that shift involved no longer funding and promoting diversity- and inclusion-related programs. In some cases, they incorporated equity or belonging into broader workplace policies or culture while avoiding terminology previously associated with those programs.

“The dramatic pivot from the new administration was abrupt and caught many organizations off guard,” Holloway said. “The legal and reputational risk tied to DEI created urgency for policy reviews and cultural recalibration.”

Talent Strategies and Skills Gaps

According to Cummings, many of the leading TR trends and strategies in 2025 were focused on talent — including attraction and retention efforts, addressing skills gaps, employee development, and grappling with multigenerational workforce needs.

Significant attention also was paid this year to calls for a performance management overhaul and ways to develop and pay for skills.

When it comes to these areas, an organization’s talent strategy drives its TR strategy, Cummings said. How can compensation programs be tied to upskilling and reskilling? Will an organization lean into recognition programs or lump-sum payments? Are they geared toward all employees or strategic roles? And, most importantly, is the data there to support paying differently for a certain skill?

“If it’s not in my data, how do I know that I’m paying competitively from a market perspective?” she said. “I have to manage pay equity on a job basis, so I can’t say, ‘This person has a different skill, so I’m paying them vastly differently,’ if I have nothing to substantiate it. The data needs to meet the moment on these talent strategies, and I’m not always seeing it in real time as it relates to skills-based compensation programs.”

Employee Experience and Engagement

Another key theme in 2025 was the increasing entanglement of employee experience and TR.

The landscape of employee expectations has shifted, said Scott Cawood, EdD, WorldatWork’s CEO.

“The workforce [that employers] had prior to the COVID-19 pandemic was not the workforce that came back to work,” he said. “One element that has shifted is that, for many employees, their tolerance for [things they consider frustrating or rubbish] has lowered, making things like having a bad boss or policies that don’t enable their best work much more costly. We are losing the battle for engagement by applying old-school work customs to a modern-day workforce.”

With salary increase budgets moderating and workers indicating pay is not their only satisfaction driver, O’Brien said organizations are continuing to evolve their strategies for keeping employees engaged and productive.

So, what’s being emphasized? She pointed to fairness, communication, targeted rewards, career growth and internal mobility, upskilling opportunities, pay transparency, good relationships with managers, and feelings of belonging.

“We used to say years ago that people quit managers,” O’Brien said. “But now, in this new era of social media, virtual workplaces and well-being, people quit as a result of bad experiences and a lack of meaningful connections.”

According to Holloway, these shifts mean it’s not only employees who are upskilling — TR pros have had to pivot as well.

“Organizations continued an emphasis on aligning the employee value proposition with shifting workforce expectations — prioritizing flexibility, personalization and holistic well-being,” she said. “[These trends] forced leaders to think beyond compliance and cost control. TR continued to become more strategic, data-driven and employee-centric than ever before.”

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics: