This paper investigates the effect of relational compensation on employee retention in hospitality industry. For this purpose, a quantitative study was done, for which data was collected from five-star hotels of Rawalpindi and Islamabad, Pakistan and a sample of 260 respondents was selected from a population of 800 employees through non- probability sampling technique. The data were analyzed using descriptive statistics, correlation and regression analysis. The results showed that there is a strong relationship between relational compensation and employee retention. The regression results indicate that responsibility and autonomy are more influential in retention and recognition and respect were found to be insignificant. The results provide directions to management of hotels that they should focus on relational aspect in addition to providing monetary benefits. Future directions are also provided.
Key words: Relational Compensation, Employee Retention, Pakistan