The purpose of this master's thesis is to define the system of compensations, their impact on the motivation of employees in the public and private sector and to present a comparison between them. Motivation is the process of increasing employees commitment and is considered one of the key foundations needed for the success of an organisation. The implementation of an effective compensation system is a critical challenge that organizations face in order to maintain the motivation of their employees. Compensation and motivational factors are theoretically closely related to the performance of employees. The performance of each individual differs according to the level and magnitude of knowledge, skills and motivation that the individual possesses. The employees performance depends on their motivation. It is very important for a company to know the factors that influence the performance of its employees, so the main purpose of this paper is to analyse the impact of compensation systems on employees motivation in the public and private sector. The paper uses qualitative secondary research based on the available literature. The aim of this paper is to show the importance of motivation, the compensation system, and to define the impact of compensation in the private and public sectors on the motivation of employees.