Internal equity refers to fair and equal compensation within an organization. External equity refers to comparable and$/$or competitive compensation offered by other organizations. As an organization establishes a compensation strategy, internal and external equity must both be considered. External equity is crucial to an organization's ability to attract new employees and internal equity is crucial to an organization's ability to retain its employees. Creating and maintaining a compensation strategy that is both internally and externally equitable results in higher employee satisfaction and decreased employee turnover. It provides guidelines for managers and$/$or supervisors to follow when pay rate changes are needed or requested, and it ensures that all employees, regardless of age, race, or gender, are paid accordingly for their role, skills, and experience.