Compensation management is a vital component of human resource management that significantly influences employee performance, motivation, and job satisfaction. This research aims to provide a comprehensive review of existing literature on the relationship between compensation management and employee performance. The research explores various theoretical frameworks, including Equity Theory, Expectancy Theory, and Reinforcement Theory, which highlight the psychological and behavioural aspects of compensation and its impact on employee productivity. The research further examines empirical research that demonstrates how different compensation structures such as base pay, performance-based incentives, benefits, and non-financial rewards affect employee motivation, engagement, and retention. Studies indicate that while financial compensation remains a primary motivator, non-monetary rewards such as career development opportunities, job recognition, and work-life balance play an equally crucial role in enhancing employee satisfaction and loyalty.