A compensation strategy is a plan that organizations use to determine how to pay their employees. It outlines the methods for setting salaries, bonuses, and benefits to attract and retain talent. This strategy considers factors like market rates, company budget, and employee performance to ensure fairness and competitiveness. Effective compensation strategies can enhance employee satisfaction and motivation. By aligning pay with the organization's goals and values, companies can foster a positive work environment. Additionally, a well-defined strategy helps in compliance with laws and regulations related to employee compensation, ensuring that the organization operates ethically and responsibly.