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The primary objective of a compensation system is to administer an effective and equitable pay system. It can be affected by various 1. ORGANIZATIONAL PROVISIONS Organizational provision states that the level of compensation largely depends upon organizational operating policies and procedures. It is because the policies serve as a guideline for formulating and implementing compensation plans and programs. Moreover, organizational regulations, plans, objectives, ability for pay etc. also affect the 2. GOVERNMENT REGULATIONS In order to protect the working clas* from wage exploitation by strong employers, the government enacts various laws ans judicial decisions. Such laws and regulations affect compensation management. Because, they emphasize on minimum wage rate, overtime rate, working hours, equal pay for equal work, payment of bonus, etc. So, an organization has to design its pay system as per the government rules and regulations. Equity considerations hold the philosophy that the compensation system should be fair and equitable. It means the compensation system should be similar for the same type of work within the organization. Similarly, it should be fair relative to what other people get for the similar job in another organization. It is important because any imbalance between what the employees contribute and what they obtain as return would lead to greater job dissatisfaction, employee turnover and absenteeism. Labor unions are pressure groups that work in the interest of the workers. Such unions lobby the management for the formulation of fair compensation plans. These organized unions can ensure better wages for employees.                                5. JOB AN*LYSIS AND EVALUATION REPORT Job an*lysis is a method through which necessary information about the contents and the contexts of the job is made available to determine Job an*lysis and job evaluation determine the relative worth of job which ultimately as*ist for compensation management. Hence, it is