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Employees are considered to be the most important asset of an organization, but organizations does not consider this fact and still perceive them as an expense in their balance sheet (Ahmed and Kolachi, 2013). In organization, employees are the most crucial assets through which all the goals & objectives are accomplished. Compensation & Benefits perform key role in defining an employee’s retention. Compensation is a valuable instrument in the hand of the management to contribute to the organizational effectiveness and can impact positively on the behavior and productivity of employees.    The need to keep down the turnover rates and remain in business has made employer’s to focus shifting to employee’s wellbeing and staff retention over customer satisfaction (Sethi, 2012). Compensation plays essential role in appealing, motivating and retaining capable employees. According to Ibrahim and Boerhaneoddin, compensation encourages effective employees to remain in employment for longer periods of time. Additionally, Ibrahim and Boerhaneoddin proposed that generous rewards retain employees and ultimately lead to job satisfaction, commitment and loyalty. Implementation of a well-planned retention strategy not only brings down the turnover rates but motivates them employees to maintain job performance productively (Scott, 2013). According to the Adam (1963) equity theory explained that there is a direct relationship between fair or unfair distribution of resources and employee performance. Through the prior studies it has been cleared that compensation have important part in job satisfaction which resulted in retention of an employee. Before we continue, we should be comprehend the compensation’s three components: pay (money or wages, commission, overtime), benefits (healthcare, vacation pay, retirement fund) and non-financial (training & development).Prior to 1970’s there was hardly concept of employee retention’s program, the Human resource department as was only engaged in arranging picnic trips and ceremonies. But with the passage of time not only technologies have changed but theories of handling human resource have also being changed. William, McDaniel, and Ford (2007) recommended that organization must raise their benefits if they can’t increase their pay in order to fulfill job satisfaction. Compensation can have a direct influence on employee retention.

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