Compensation is important to an organization because it influences staff turnover, work morale and staff performances. Fallon and McConnell (203) suggest that employees are concerned about compensation and benefits they receive after rendering their services. Therefore, compensation and benefits are important because it influence employee performances. The staff seeks to be compensated well in the organization, which they work for. However, some organization fails to compensate their employees accordingly. Such companies practice discriminatory compensation practices while others may take a long time to compensate their staff in case they fall sick or are injured in the workplace. Furthermore, some companies offer inadequate compensation to their employees. Discriminatory compensation practices, delayed and inadequate compensation are some of the key challenges that are facing the human resources department. Poor compensation policies and procedures can be very costly to the organization. Consequently, employees may perform below expectations, high employee turnover, and industrial actions usually follow suits. The organizations suffer costs incurred because of legal suits, lost time, low productivity levels, and recruitment costs. According to McConnell (334-335), the role of the human resource department is to maintain the appropriate compensation structure of the organization.The human resources departments are struggling to establish human resource policies that are good and perceives as fair by all the employees and other stakeholders. However, the challenges in compensation practices and policies continue to exist in most organizations. As a result, most employees feel demotivated, misused, and disregarded. The challenges that exist are explained as follows. First, compensation discrimination is real in most organizations. There are instances when employees feel that salaries and other benefits they receive are lower as compared to other employees with the same set of skills, experience, and performance. The rate of pay is lower and in case they are injured, their compensation is also less as compared with other identical employees.