Evolving Paradigms in Compensation Through AI-Driven Benchmarking, Skill-Based Incentives, and ESG Integration

A transformational change is taking place in the landscape of employee remuneration, which is being pushed by artificial intelligence (AI), the growing emphasis on skills rather than traditional roles, and the incorporation of Environmental, Social, and Governance (ESG) criteria. The purpose of this chapter is to investigate the ways in which firms are moving toward AI-driven benchmarking, applying skill-based incentives, and aligning compensation with environmental, social, and governance goals. In addition to presenting actual applications and making recommendations to improve transparency, fairness, and strategic alignment, it explores the theoretical and conceptual underpinnings that are supporting these trends. The chapter also provides an analysis of the implications for future study and practice in the field of human resource management, as well as an evaluation of new trends and ethical challenges.