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The HR Basics series focuses on essential human resource management topics. In this tutorial, the emphasis is on building a compensation plan, which consists of seven critical steps to establish a pay structure. Compensation refers to the payment an employer provides for work. For a compensation plan to be effective, it must be perceived as fair and competitive, accurately based, and easy to understand. HR professionals may create this plan in-house or collaborate with external consultants. A basic compensation model includes internal alignment, external competitiveness, and compensation management. The seven steps involve job analysis, job evaluation, pay policy, market analysis, and base pay structure development.
