Employees’ performance-based remuneration (Korean and Chinese practices)

Abstract

In world practice, tariff-free and flexible remuneration systems are used. Remuneration systems based on the results of employee performance evaluation are becoming especially relevant. The author has believed that such an experience would be useful for Ukraine, as there is an unfair distribution of the salary fund at domestic enterprises.
 The author has argued that the basis of remuneration should be based on the labour results of employees, their achievements and high qualifications and professionalism. It has long been necessary to move away from “equalization” in remuneration, because everyone performs the same duties differently, and therefore remuneration should be different. That is why I turned to the experience of Japan and China, because it is in these countries that such an approach has always been used, and therefore their practice can be useful for Ukraine. 
 In Japan and China remuneration has been based on the results of employee performance appraisals for a long time. These countries have developed special methods of calculating wages, which take into account many indicators.
 Raising flexibility of compensation system is emerging as a big social issue.
 Korea is facing rapidly aging population and deteriorating corporate competitiveness. Companies in Korea attempted to improve the pay structure by increasing the performance-based factors within the existing pay structure, the best example being the “annual salary system.” For individual companies, converting the current automatic pay raise scheme into a performance-based scheme will help ease the rigidity of the current pay structure. The prerequisite is that fairness must be ensured when evaluating performance. Responsibilities should also be allocated appropriately to allow equal opportunities for all individuals to make the best use of their skills and talents and adequate investment should be made to develop necessary human resources. Improvement in the overall work system should precede the move toward broader implementation of the performance-based pay structure.
 Pay for performance programs in China are compensation plans that pay employees on the basis of some performance measure. This performance measures might include such things as individual productivity, team or work group productivity, department productivity, or the overall organization’s profits for a given period. Performance measure and management is essential for implementing performance-based compensation system effectively and efficiently.