The article presents an analysis of compensation systems in Italy, as seen from different angles: historic, trade union, organizational, managerial, contractual. The aim is to demonstrate the links among the compensation system, individual expectations, the organizational functioning of the firm and its external environment. The article examines the birth and the growth of incentive methodologies as an answer to the employees’ needs and to make the cost of labour variable: management by objectives (mbo) systems, if correctly implemented, can represent a happy meeting point between persons and organizations. The exact working of the variable incentive system based on objectives depends upon the presence and the respect of the contractual characteristics contained there in, here defined as ideal and legal. The hope is to offer a global vision of the subject which can be used to set up a functional incentive system.