A pay group refers to a categorization or classification of employees within an organization based on specific factors that determine their compensation or pay structure. It is a method used by companies to organize and manage employee compensation effectively. Pay groups help ensure consistency and fairness in how employees are paid, taking into account factors such as job roles, skills, experience, or other relevant criteria.

Example
In a large retail organization, employees may be categorized into different pay groups based on their job roles and levels. For instance, there may be separate pay groups for store managers, sales associates, warehouse staff, and administrative personnel. Each pay group would have its own defined compensation structure, such as salary ranges or pay grades, to determine the appropriate pay levels for employees in those roles.