How employees are paid is one of the most important decisions an employer will make. Their compensation—especially in relation to others—has significant implications for recruitment, retention, and motivation. Although a private sector employer may negotiate pay with each individual employee, the days are long gone where this would be considered acceptable in the public sector. The standardization of pay is closely related to the standardization of jobs in the form of position classification schemes. Therefore, before discussing the methods by which employees are paid in the public sector, this chapter explains the history and mechanics of position classification. This history is important because, of all the personnel functions, classification systems have probably been the slowest to evolve. They represent a critical component of a fair and equitable compensation system; that is, the means by which work is organized into job groupings or classes. These job classes are then further distinguished by pay categories or grades, depending on the demands of the job. One of the reasons for this is to ensure that people doing the same work receive the same pay.