Since the issue of wage and salary determination has always enjoying the major consideration for any organization, it should be develop and maintain based on sound principles , some of them are narrated below, attempt should be made to incorporate them as far as possible while designing the compensation system

1. There should be a definite plan and system to ensure that differences in pay for jobs are based upon variations in job requirements, means maintaining equity in the distribution of wages and salaries in the organization.
2. Maintaining competitiveness in the wage market means the general level of wage and salary should be reasonably in line with that prevailing in the market.
3. Matching employees’ expectations and it should avoid unjustified discrimination by providing equal pay for equal work.
4. Reinforcing positive employee behavior and contribution to the organization, differences in the compensation package should be based on contribution, productivity, job performance, achievement etc.
5. Devising a system that is the most efficient for the organization, as far as possible it must eliminate any discrepancies or exploitation of the employees.
6. The compensation system should formulate and define rules and regulations for determining, changing, adjusting wages in the organization.
7. The compensation package must ensure fairness, should maintain harmonious relationship between the employee and employer.
8. Compensation system should be flexible enough so that future changes can be incorporated.
9. The wage and salary administration should take care of and comply all the rules and regulations laid down by the legislator for protecting the employees’ interest.
10. Optimization of management and employee interests.