Abstract: This paper examines the notion of compensation management and the challenges which are associated with different aspects of compensation system in the present scenario. What motivates an employee to work better: People in work place? An awesome manager? Employee''s nature of job. Well, these could just be one of the reasons but employee''s compensation always tops the list. What is employee''s compensation: To be precise, Compensation is what an employee gets in return to his contribution to the organization. The term compensation includes pay incentives and benefits offered by the employers for hiring the services of employees. Compensation plays an important role in any HR department''s efforts to obtain, maintain and retain the effective work force. Compensation planning follows a set of objectives. The most important objective of any system is fairness and equity.