Beijing Ties State-Owned Enterprise Pay to Business Performance

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China’s State Council has launched new measures to link total remuneration at state-owned enterprises (SOE) to economic performance.

The State Council released the “Opinions Concerning the Reform of Mechanisms for Deciding Salaries at State-owned Enterprises” (关于改革国有企业工资决定机制的意见) on 25 May.

The Opinions stipulate that the total remuneration for SOE employees in a given year should in principle be reduced when the economic performance of a company tanks, unless this is the result of non-business factors such as policy adjustments.

When SOE’s fail to maintain or increase the value of state-owned assets, total remuneration for a given year cannot be increased, or will be appropriately reduced.

The Opinions further stipulate that when the economic performance of SOE’s improves, total remuneration for that year may be increased by no more than the improvement in economic performance.

Under the Opinions SOE’s will be allowed to independently determination internal remuneration allocations when they apply for filing or approval of total salary budgets.

The remuneration bias will favour those in “key positions, front-line production positions, scarce and urgently needed senior positions and hi-tech talent,” while SOE management are called upon to “rationally increase the salary allocation distances, and adjust irrational, excessively high remuneration.”

In addition to adjustments to remuneration mechanisms, the Opinions also mandate greater transparency of SOE salaries.

They call for the establishment of an SOE remuneration allocation public information system, with Chinese SOE’s required to regularly make relevant information publicly accessible, including total remuneration amount and average staff remuneration levels.

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