Compensation refers to all forms of financial benefits received by an employee from the employer arising from the employment. Compensation is one of the important motivating factors for employees. Compensation is also known as rewards received by an employee. Compensation is the economic value for human labor and effort. The pay and benefits that employees earn play an important role in motivating them. This is especially true when rewards such as bonuses are linked to the individual’s or group’s achievements. Decisions about pay and benefits can also support other aspects of an organization’s strategy. All such decisions have implications for the organization’s bottom line, as well as for employee motivation. Administering pay and benefits is another big responsibility.