Toward performance-based compensation: a study of the gaps between organizational practices and employee preferences with regard to compensation criteria in the state-owned sector in China

Abstract

This study seeks to explore the gaps between employees' preferences of compensation criteria and compensation criteria adopted in the state-owned sector in China. A survey among 772 employees from a large state-owned enterprise shows that employee preferences were at variance with organizational practices in that employees emphasized performance-oriented (i.e. task- relevant and collaboration-relevant) criteria more, and personal background criteria less, than did organizational practices. These gaps were moderated by employees' education level and tenure. Employees with higher education and shorter tenure showed larger gaps between preferred criteria and those used in the organization. Interviews of employees further substantiated the quantitative findings and provided some reasons for the existence of the gaps. Theoretical and practical of the results are discussed.

Keywords:

• China
• compensation criteria
• gaps
• state-owned enterprises

Acknowledgements

This research was supported by a grant from the Humanities and Social Sciences Research Foundation of Ministry of Education, PRC (08JA630090) to Peiguan Wu.