The Reform of Employee Compensation in China’s Industrial Enterprises

Although employee compensation reform in the Chinese industrial sector has been discussed in the literature, the real changes in compensation systems and pay practices have received insufficient attention and warrant further examination.This paper briefly reviews the pre- and post-reform compensation system, and reports the results of a survey of pay practices in the four major types of industrial enterprises in China. The research findings indicate that pay is linked more to individual performance and has become an important incentive to Chinese employees. The current pay practices are positively correlated to overall effectiveness of the enterprise.