In recent years, under internationalization, liberalization and competition from China, Taiwan has the urgent need of high quality of human resource and subsequently it makes the ¡§human¡¨ management more complicated. Therefore, medium & small companies faces another new challenge and human resource management has become a big brand of knowledge for nowadays industry operation and management. How to use minimum investment to earn maximum employee loyalty is a big challenge for future human resource management. In the scope of the human resource management, compensation management is key section, like improper compensation management will cause another compensation dispute and the rise of dispute will force industry to pay more attention on the employee¡¦s legal labor rights. Furthermore, poor handle of dispute, consequently if seriously, will cause the dispute between labor and capital, even slightly, will have negative impact on company overall morale, and furthermore, affect company human resource performance. This resource will have medium & small companies as resource targets and focus on probing the relationship between compensation system, labor condition and human resource performance. Followings are the major research results: 1.Technical based compensation system will have effect on the assignment achievement performance. 2.It will have positive effect on the employee salary satisfactory and work performance if medium & small companies offer subsidy for further education, uniform, meal, weddings and funerals allowance and Mid-Autumn festival bonus. 3.There are obvious relationships among different compensation types, compensation basis and conditional performance. 4.Medium & small companies offer for subsidy of further education, transportation, training, other bonuses and annual bonus or not will have significant differences on employee¡¦ salary satisfactory and work achievement performance. 5.Selecting different work hours per week, calculation basis of overtime (holiday) work pay, total annual vacation days given, calculation basis of special rest days will have significant differences on compensation basis, salary satisfactory and work achievement performance. 6.Different employee characteristics will have remarkable differences on compensation basis, employee leave tendency, salary satisfactory and work achievement performance.