Refers to the policies, structures, decision-making processes, and oversight mechanisms an organization uses to ensure that their employee compensation is fair, competitive, legally compliant, transparent, and aligned with organizational goals. It encompasses how decisions are made regarding salaries, incentives, bonuses, equity awards, promotions, and executive compensation, as well as who is responsible for approving and monitoring those decisions.

Strong pay governance helps organizations manage compensation consistently across the workforce while supporting recruitment, retention, performance, and regulatory compliance. Increasingly, organizations are also considering how AI-assisted compensation tools, pay transparency requirements, and skills-based pay models fit within their governance framework.