Research Paper on Compensation Management in Foreign Invested Enterprises
Abstract In the context of the new normal economy, with the continuous upgrading and optimization of industrial structure and the reduction of government preferential policies, the development of foreign invested enterprises generally face difficulties, attracting and retaining talents become more competitive, and scientific and reasonable compensation management is an important link for enterprises to form talent advantages, which has important Significance. Taking AK Company as a representative of foreign-invested enterprises, we analyze the problems of single salary structure, separation of performance appraisal and salary incentive, and imperfect promotion system in its salary management, and put forward corresponding salary management improvement measures in a targeted manner, with a view to providing some inspiration and reference for the development of foreign-invested enterprises.
Keywords: foreign-invested enterprises; compensation structure; variable pay; promotion system
Foreign-invested enterprises refer to enterprises established in China in accordance with the laws of the People's Republic of China*** and the State, which are invested by both Chinese and foreign investors*** or invested only by foreign investors. With the growing maturity of economic development and the deepening of supply-side reform, China's economy is moving towards a new normal trend. However, in recent years, China's foreign-invested enterprises have performed poorly and faced difficulties in their development, the reasons for which mainly include the following aspects: first, the increasing labor costs, compressing the profit margins of foreign enterprises; second, the adjustment of the preferential policies originally enjoyed by foreign enterprises and the reform of China's tax system, which has brought certain operating pressure on foreign enterprises; third, the improvement of the strength of the local enterprises, and the market competition has become more and more intense; and fourth, China's legal system Fourth, the continuous improvement of China's legal system, crack down on commercial bribery and monopoly and other behaviors. In this situation, some labor-intensive foreign-invested enterprises in China have shifted to South Asia and Southeast Asia. Some foreign-invested enterprises have actively adjusted their responses to promote their own transformation and upgrading, and more technology-intensive and asset-intensive foreign-invested enterprises have moved into China. At the same time, some problems exist in the salary management of China's foreign-invested enterprises, restricting their development in China. With the development of knowledge economy, excellent talents have become the key factor for enterprises to maintain vitality and creativity and realize sustainable development. Compensation management, as an important part of human resource management, plays an effective motivational role in attracting and retaining talents. Therefore, this paper takes AK Company as an example to research on the aspects of compensation management in foreign-invested enterprises.
I. AK Company and its current situation of compensation management
AK Company is a wholly foreign-owned biotechnology limited company, founded in 1995, located in Hangzhou, Zhejiang Province. It is the global strategic production base of XX Group, with a total of more than 600 employees. With the technical support from the headquarter and the production base in China as the development guarantee, the company's products involve many fields such as biological diagnostics, medical devices, etc., with sales in more than 140 countries around the world, and has successfully developed medical devices such as blood glucose meters, hemoglobin analyzers, etc., and the corresponding test reagents, etc., for rapid diagnostic products.As a company transforming itself from labor-intensive to technology-intensive, AK has the same characteristics as most of the foreign-invested enterprises in China. As a company transforming from a labor-intensive to a technology-intensive enterprise, AK is in the same situation as most of the foreign-invested enterprises (FIEs) in China, and the results of this study have certain practical significance for the development of FIEs. At the beginning of its investment in China, AK mainly produced and processed products, and its organizational structure was relatively simple. However, with the objective environment and its own strength continue to change, AK will be part of the technology research and development work transferred to China, the inflow of technology research and development personnel so that its organizational scale continues to grow. As a result, AK has formed its current compensation system according to its own development, which is as follows: from the point of view of the salary level of employees, the average monthly income of individuals in AK is around 5,000 yuan. According to the data published by the China Business Industry Research Institute in 2017, the average monthly salary in Hangzhou is 7,608 yuan, compared to the average monthly income of individuals in a lower position in the regional scope. In terms of salary structure, it includes three major parts: fixed salary, variable salary and benefits. Fixed remuneration includes basic salary, allowances, etc.; variable remuneration includes performance pay and bonus commission; and benefits include five insurance policies, annual leave, etc. AK has decided to adopt a hybrid remuneration strategy based on the different organizational structures and types of employees. The company hopes to attract a large number of excellent talents to improve the core competitiveness of the company and promote its transformation; the company adopts the performance incentive system for the marketing staff to improve their motivation and create greater economic benefits; and the company adopts the follow-on compensation strategy for the staff engaged in the basic and routine work such as finance, human resources management, administration and so on. Strategy. According to the above analysis of the current situation of AK Company's remuneration, it can be seen that there are still many problems in AK Company's remuneration management, and these problems are precisely the problems that exist in the remuneration management of current foreign-invested enterprises in general.
The problems and reasons of AK's salary management
(1) Single salary structure, low economic compensation
AK's salary consists of fixed salary, variable salary, and benefits, of which the fixed salary is based on the basic salary, which increases by 5% per year; the fixed salary is based on the basic salary, which increases by 5% per year; the fixed salary is based on the basic salary, which increases by 5% per year; and the fixed salary is based on the basic salary. The annual increase of 5%; variable pay is based on bonuses, year-end awards based on the different positions to give 1-2 months of salary incentives; benefits, including statutory social security and annual leave, the lack of high incentive effect of the measures, so employee satisfaction is generally low. The reason for this is that, on the one hand, AK entered the Chinese market at the end of the last century, and after more than a decade of rapid development, the development stage and environment in which the enterprise is situated has changed dramatically, however, the enterprise's compensation system has not been reformed and innovated; on the other hand, in recent years, some of the foreign enterprises in China have faced difficulties in development, and the increase in costs has led to a decrease in net profit, so the salary is unable to guarantee the original increase of 10%-20%, and it is difficult to increase economic compensation. It is difficult to improve the economic compensation. As a result, the current compensation system is outdated and lacks external competitiveness, making it difficult to attract and retain talent.
(b) the separation of compensation incentives and performance appraisal results
According to the enterprise's own situation, the organic combination of compensation management and performance appraisal, is conducive to tapping the potential of employees, to play the best effect of compensation incentives [1]. However, AK company in the process of business management, there is a pay management and performance appraisal is not closely linked, variable pay in the overall pay accounted for a relatively low proportion of the problem. The main reason is that the company takes equal pay for equal work as the principle of salary design, so it is impossible to widen the salary gap of employees with the same position, and it is difficult to reflect the different contributions made by employees with different levels of ability to the company. Although AK has formed its own performance appraisal system and evaluation standards, due to the imperfect appraisal tools, lack of ability of appraisers and the fact that the appraisal results do not have a great impact on salary and promotion, there is a phenomenon of "going through the form" in the process of performance appraisal, which is contrary to the original intention of setting up the variable pay program, resulting in a great waste of company resources and an increase in internal consumption.
These are the most important factors for the success of the company, and the most important for the future of the company.
(C) the salary promotion system set unreasonable, career ceiling
The glass ceiling is a metaphor for the invisible obstacles faced by female workers who want to reach the top of the enterprise [2]. Although in previous studies, the "glass ceiling" phenomenon occurs in women, but with the practice of foreign-invested enterprises in China, the internal career development of local talented employees, there is also a "glass ceiling" phenomenon. For example: AK is a vertically managed organization structure, management positions are more centralized, under these conditions, most of the middle and senior management personnel are dispatched from the headquarters, only the grassroots and the middle level of a very small number of positions through the recruitment of the selection of local employees, which inevitably leads to some of the best talent to apply for the phenomenon of leaving the company after entering the company for 1-2 years. Therefore, the reasons for talent loss, in addition to low economic compensation, also include the failure of the enterprise to develop a scientific and reasonable career planning for the staff, staff promotion paths and a single route, etc. The above problems and reasons for the existence of the AK Company have a certain reference for the compensation management of China's foreign-invested enterprises, and the improvement measures and recommendations for the compensation management of the AK Company have a certain inspiration and suggestions for the compensation management of China's foreign-invested enterprises.
Third, AK's payroll management to foreign-invested enterprises payroll management inspiration
(a) set up a comprehensive payroll concept, pay attention to the combination of internal and external payroll
The so-called comprehensive payroll, refers to the company in order to achieve the organization's strategic objectives of the contribution to the individual or team system rewards. The first is to make sure that the company's employees are well aware of the importance of the company's work. When setting up a compensation system, it is important to focus on both internal and external compensation design, combining traditional salary programs with new types of reward programs, and developing a comprehensive compensation system based on the company's development strategy. Like AK, many foreign-invested enterprises are in a period of transition and are in urgent need of technical R&D talents and management reserve talents to sustain the long-term development of the organization. Therefore, under the background of fierce competition in the market, for the external salary, a systematic salary survey should be conducted, and the collected data should be analyzed scientifically and professionally, and the basic salary of each position should be set accordingly to improve the external competitiveness of the salary; for the internal salary, the first step should be to improve the working environment and the office facilities, especially the introduction of high-tech equipments; and the second step should be to formulate the personalized training program based on the competence level of employees to improve the competence of employees. Secondly, according to the level of competence of the staff, the development of personalized training programs to enhance the ability of the staff; then, regularly on the outstanding performance of the ` employees for recognition and awards, to enhance their sense of belonging to the organization, to play an exemplary role; and finally, the organization of sports and cultural activities and outings and other projects to enhance the humanistic care of the enterprise and the staff's exchanges and communications, the formation of harmonious interpersonal relationships, to meet the needs of the staff's psychological rewards.
(b) Increase the proportion of variable pay, promote internal equity
In the setting of variable pay, first of all, there should be additional monthly or quarterly bonuses, the combination of the employee's personal performance and salary [3], to achieve the purpose of short-term incentives for pay. Secondly, it should formulate the income and profit sharing plan, strengthen the staff's "master" consciousness, the enterprise must set the performance target of each department at the beginning of the year, and retain a certain degree of flexibility, at the end of the year based on the profitability of the enterprise and the performance of each department to determine the proportion of the departmental profit distribution, to achieve the purpose of long-term incentives for remuneration. Before that, enterprises need to streamline and optimize the original performance appraisal system, use scientific and professional assessment tools, and develop a new performance appraisal system suitable for the characteristics of the enterprise. In addition, enterprises need to publicize the results of performance appraisal and departmental performance results to ensure openness and transparency, and the Human Resources Department to monitor and verify the entire performance appraisal process. As a result, not only can the enterprise in the external environment is in a disadvantageous situation to continue to maintain the development of increased income, but also can greatly improve the enthusiasm and initiative of the staff to enhance the cohesion of the enterprise, to ensure that the internal fairness of the remuneration.
(C) pay attention to the long-term development of employees, training and retention of talent
Based on Maslow's theory of needs, the enterprise to develop a scientific and feasible promotion management system, tailored to the design of career development planning for employees, are in the basic needs of employees on the basis of meeting the demand for self-fulfillment. Similar to AK's foreign-invested enterprises can set up a multi-channel promotion mode, for example, for technical personnel, can choose to technical route development, can also choose to management route development, the enterprise provides a variety of promotion options for employees, is conducive to maximize the performance of the employee's ability to match the most appropriate position, to create more value for the enterprise. In addition, the enterprise should adjust its own organizational structure, appropriate increase in organizational hierarchy, reduce the frequency of use of "parachutists", when there are vacancies, priority consideration of internal staff, which can shorten the staff to adapt to the new position of the integration period, but also to enable the local staff to see the prospects for career development, reduce the turnover rate, which is conducive to the realization of the organization's strategic objectives. The company's strategy is to make sure that the company is able to achieve its strategic goals.
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[2]Bai Donghong, Zhao Xinyuan, Fan Xinping. The "glass ceiling" of foreign-funded enterprises and local employees' tendency to leave: the moderating effect of volatile careers[J]. China Human Resource Development, 2017, (04): 22-31.
[3]Chen Dan. Research on the causes of talent loss and coping strategies of enterprises [D]. Suzhou: Soochow University, 2016.
Author:Zhang Peng Zheng Xue Unit:School of Management, Liaoning Normal University
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