There are many factors to consider when developing a fair compensation
             plan. Internal and external equity are key considerations for offering
             comparable salary and benefits. Internal equity refers to fairness between
             employees in the same company while external equity refers to relative wage
             fairness compared to wages with other businesses. In addition to wages,
             it's important to determine what affects an individual's motivation. In
             this effort, expectancy theory can be applied. Expectancy theory is based
             on three perceptions, valence, instrumentality and expectancy. This paper
             describes the steps to achieve internal and external equity as well as high
             levels of motivation and cautions of the repercussions for failure to do
             With regards to internal equity, job descriptions, job analysis and
             job evaluation help employers compare different jobs and create fair
             compensation. Job descriptions define the responsibilities, requirements,
             functions, duties, location, environment, conditions, and other aspects of
             jobs. Job analysis is the process of analyzing jobs from which job
             descriptions are developed. Job analysis techniques include the use of
             interviews, questionnaires, and observation. Data should be gathered from
             executive management for all departments as well departmental managers and
             employees. Last, but not least, job evaluation is a system for comparing
             jobs to determine appropriate compensation levels for individual jobs or
             elements. Common techniques include ranking, classification, factor
             comparison and point method and are summarized as follows:
             Ranking: Compare jobs to each other based on the overall worth of the
             Classification: Group jobs into an existing grade/category structure
             Factor Comparison: Identify factors determining the worth of jobs
             such as skill, responsibilities, effort and workin
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