A payment system can be defined as a method or means for determining employee wages or salary. As such, it represents a central mechanism for the regulation of the employment relationship. For management the importance of payment systems is reflected in what often appears to be an ongoing preoccupation with finding new and better ways of paying employees.

Given that pay is one of the defining characteristics of the employment relationship and consequently a powerful means for the exercise of managerial control, the pursuit of ever more 'efficient and effective' techniques for its allocation is hardly surprising. However, as a technique for the pursuit of managerial control, payment systems have been subject to countervailing workplace pressures exercised by employees, work groups and their representatives. Indeed, a well-established academic literature has developed which has sought to analyse the degeneration or decay of the payment systems in terms of competing managerial and employee interests as they relate to the operation of such systems.

It is clear, therefore, that payment systems cannot simply be perceived as structural artefacts captured through passive categorization or by simple typologies. Rather, a payment system is a process which raises questions about the exercise of choice, implementation, operation and impact.

It is important to distinguish between payment systems and other terms, such as pay structure and pay level. These terms are often closely associated with payment systems but are analytically distinct. A pay or grading structure is a rational ordering of jobs, often devised through the application of job evaluation and usually reflecting the different roles and the contributions they make to the organization. A pay level is the amount or rate received by an employee and is usually generated through the combined operation of payment systems and structures. While closely related to the development and operation of payment systems, the techniques associated with the establishment of pay structures or setting of pay levels are analytically separate and not dealt with here.

Ian Kessler