Interview with Zhu Changming: The purpose of the reform of the total wage management of state-owned enterprises is not to reduce wages but to market them

Recently, a reporter from the Economic Observer asked several employees of state-owned enterprises from different industries and at different levels, and many people said that the salary and year-end bonus in the fourth quarter of 2023 will be reduced, especially the company's management and administrative positions.

Zhu Changming, a partner at Sunshine Law Firm, has long provided reform consulting services for central state-owned enterprises, and in his view, the changes in wages of state-owned enterprises are mainly due to the stricter management of total wages. "The external cause is the influence of the economic environment, and the internal cause is the reform drive. For example, in the past, the adjustment of the final indicators and the assessment of incompetent exit are the focus of quantitative assessment, and there are specific assessment index requirements, which is also the internal factor," Zhu Changming said.

After more than 30 years of continuous exploration and exploration, the reform of the total wage management system of state-owned enterprises has undergone a transformation from micro to macro, from "one-size-fits-all" to "classification and grading", highlighting the characteristics of industries and enterprises, and taking into account efficiency and fairness.

Economic Observer: Why have some state-owned enterprises cut salaries recently?

Zhu Changming: At present, state-owned enterprises in some industries are unable to pay wages in the fourth quarter, not because they have no money, but because the total wages are stuck. In the past, the regulatory authorities have been saying that they will increase the reform of the market-oriented mechanism, but the effect is not obvious, and in 2023, many enterprises will move seriously, especially the third-level and fourth-level sub-enterprises, and the assessment will be more stringent.

Of course, salary reduction is not the goal, the real orientation is marketization, marketization is to be able to rise and fall, marketization is also reflected in the emphasis on innovation, science and technology talents, to make this part of the core talent salary level go up, give them medium and long-term incentives, through equity, co-investment to increase the attractiveness of state-owned assets to them.

The Economic Observer: Why this change?

Zhu Changming: The external factor is the influence of the economic environment, the internal factor is the reform drive, the adjustment of the final indicators and the assessment of incompetent exit are the focus of quantitative assessment, and there are specific assessment index requirements, which is also the internal cause.

In the past, many state-owned enterprises did not do enough in the above aspects, and the above indicators also had a large gap with the social average indicators, and the liquidity was obviously insufficient. But in 2023, and even in 2024, state-owned enterprises will be very strict in this area.

Economic Observer: Why do state-owned enterprises make money, but the money can't reach the employees, and the employees have to cut their salaries?

Zhu Changming: Data is data, and data is not equivalent to cash flow, nor is it equivalent to an increase in total wages. Gross salary is a model, and this model is associated with many indicators, such as total profit. However, now there are more and more requirements for indicators, which are embodied in the general principle of "one adaptation and two linkages" (establishing and improving the wage determination and normal growth mechanism that is basically adapted to the labor market and linked to the economic efficiency and labor productivity of state-owned enterprises).

Economic Observer: How is the current total wage management system formed, and why is the total wage management promoted on the ground?

Zhu Changming: This process can be roughly divided into three stages: job grade linkage, work-efficiency integration, total salary budget management, and the intensive policy impact period after 2018.

The wage model linked to the post grade is a management model based on the post grade wage system, and the salary of each employee is determined according to the job grade; the income of the employee is completely decoupled from the operation of the enterprise, and the "work is the same" and "the work is the same", and the "work is more and the work is less".

The work-efficiency linkage model refers to the model that after the reform and opening up, state-owned enterprises need to face the market and mobilize the enthusiasm of employees, and the total wages have been linked to economic benefits since 1985. The total wage of an enterprise shall be determined on the basis of the approved wage base and the benefit base, and shall be determined according to the growth rate of the actual benefits realized by the enterprise. The work-efficiency linkage policy has effectively enhanced the vitality of enterprises for a certain period of time, but the problem is also more prominent: the income gap between state-owned enterprises in the same industry is very large. The important characteristics of work-efficiency linkage are that the growth of total wages is lower than the growth of economic efficiency, and the growth of real average wages is lower than the growth of labor productivity, that is, "two lower".

The total salary budget management model is due to the "two lows" model, in which enterprises "only compare with their own past", ignoring the horizontal comparison between enterprises, resulting in unfairness between enterprises. At the time of the rapid expansion of the market scale, the profits of enterprises continue to grow, and the problem is not big, but in the period of economic transformation, in the face of the decline in economic growth, the wages of employees will fluctuate greatly or even decline, so the total salary budget management has been gradually implemented since 2008. Under the total wage budget management mode, the higher-level departments mainly control the "total salary" and "the increase of per capita wage", and cap the growth of per capita wage.

After 2018, a large number of "opinions", "measures" and "notices" on the management of total wages have been intensively promulgated, and new atmosphere and new characteristics have emerged in the management of total wages in state-owned enterprises. In 2018, the State Council issued the Opinions of the State Council on Reforming the Wage Determination Mechanism of State-Owned Enterprises (Guo Fa [2018] No. 16, hereinafter referred to as "Document No. 16"), which clearly proposes to reform the total wage determination mechanism based on the principles of "adhering to the direction of reforming the system of modern state-owned enterprises with Chinese characteristics, adhering to the unity of benefit-orientation and maintaining fairness, adhering to the combination of market decisions and government supervision, and adhering to classified and hierarchical management". At the same time, it is also proposed for the first time that state-owned enterprises should "improve the linkage mechanism between wages and benefits", which is a continuous deepening of the "Guiding Opinions on Deepening the Reform of State-owned Enterprises" of "one adaptation and two linkages".

In the same year, the Measures for the Administration of Total Wages of Central Enterprises (Order No. 39 of the State-owned Assets Supervision and Administration Commission) made a useful supplement and further extension to Document No. 16, with a view to taking advantage of the changes in the total wage management of central enterprises to drive good changes in the overall total wage management of state-owned enterprises.

However, there are still problems in the total wage management of state-owned enterprises, such as single incentive mode, fixed wage structure, and small incentive constraints, which need to be continuously reformed and deepened to improve a more accurate, flexible, standardized and efficient income distribution mechanism.

Economic Observer: What is the next step in the reform of total wage management of state-owned enterprises?

Zhu Changming: First of all, it is necessary to further intensify the market-oriented reform of total wage management, strictly implement the total wage budget, strengthen "in-process monitoring" and "post-event supervision", and do a good job of mid-year self-examination and adjustment according to the operation of enterprises, so as to realize that the wage level of employees of central enterprises is compatible with the market level.

Second, it is necessary to continue to promote the "hierarchical and classified" total wage management, and implement differentiated total wage management methods and decision-making mechanisms according to the enterprise level, functional positioning, industry characteristics and business nature, etc., especially to the state-owned enterprises in strategic emerging industries, and give full play to the role of total wages in promoting the development of strategic emerging industries.

Third, we will continue to explore more flexible and efficient methods of total wage management, and make full use of various policies, including separate total wages, periodic management of total wages, and policies such as "increasing the number of employees without increasing the total amount, and reducing the number of people without reducing the total amount", so as to realize the streamlining and efficiency of employees and the expansion of total salary space, improve the efficiency of total wages, and promote the distribution of total wages to key positions and high-tech talents.

The Economic Observer: What are the operational paths in order to promote the above-mentioned reforms?

Zhu Changming: The first is to form a reasonable expectation of employee income distribution, and the total salary budget and internal salary distribution should be transparent, comparable and calculable, so that enterprises and employees can calculate the total salary they can obtain by themselves, and achieve self-management, self-restraint and self-motivation within the transparent rules.

The second is to build an innovation incentive mechanism, adhere to the value contribution-oriented, establish a multi-incentive mechanism that combines short-term and medium- and long-term, realize the linkage between incentive goals and high-quality development of enterprises, and build a differentiated incentive portfolio.

The third is to improve the internal salary distribution system, establish post-based value management, tilt salary distribution to key positions, front-line positions and high-precision talents, reasonably open the salary distribution gap, strengthen the performance appraisal of all employees, so that the salary income of employees is closely linked to their work performance and actual contributions, and effectively increase and decrease.

Fourth, we should carry out regular evaluation and optimization work, and when the functional positioning, development stage, and corporate governance of the enterprise change, the total wage management mechanism should also be adjusted accordingly. Therefore, whether the current total wage management mechanism meets the current needs of operation and management needs needs to be evaluated and optimized on a regular basis.

The Economic Observer: How to establish a differentiated total wage management system in the future?

Zhu Changming: In order to establish a differentiated total wage determination model, for different types of enterprises, a differentiated total wage determination model should be established: the first type of business can adopt the full performance linkage decision model, which fully embodies the principle of "one adaptation and two linkages";

There is also the establishment of a differentiated total wage linkage index system, the total wage budget is usually determined by the three links of efficiency, efficiency adjustment, and level control, and it is necessary to establish a differentiated total wage linkage index system according to the industry characteristics, enterprise attributes, and development stage of state-owned enterprises to meet the needs of high-quality development of state-owned enterprises.

First of all, the benefit index is the decisive indicator and has the greatest impact. It mainly guides enterprises to pursue excellent performance, and the benefit index determines the approximate range of total wage growth. Commonly used benefit indicators include total profit (net profit), economic added value, return on net assets, state-owned capital preservation and appreciation, market share, etc.

Secondly, the efficiency index is a adjustment index, which has a small impact, and guides enterprises to control labor costs and total labor costs, and makes slight adjustments under the influence of determining indicators. Common efficiency indicators include per capita added value, per capita profit, per capita operating income, per capita workload, labor cost profit margin, etc.

Third, the regulatory indicators reflect the principle of fairness, lock in the growth range of total wages, ensure relative fairness and adjust the excessive income gap. Commonly used regulatory indicators are mainly market or industry benchmarking indicators.

The growth rate of an enterprise's total wages is determined by its efficiency, and the growth of efficiency is inseparable from performance. In the process of market-oriented reform, the key to ensuring the effectiveness of the total wage management of enterprises is to truly establish an effective performance management mechanism. Enterprises should establish a mechanism for the application and feedback of performance appraisal results, and link the appraisal results with salary distribution, job appointment and dismissal, and post adjustment, so as to realize that salary can be increased or decreased, managers can be promoted or demoted, and employees can be promoted and discharged.

Economic Observer: What other suggestions do you have for the separate management of total wages?

Zhu Changming: In the context of the deepening and upgrading of the reform of state-owned enterprises and the adjustment of the layout of the state-owned economy, the important purpose of implementing total wage management is to transform the pressure of total wage management into the driving force for the reform and development of enterprises. Separate management is an important way to explore more flexible and efficient total wage management, which can give a clearer incentive orientation for special types of enterprises or special matters, and has a positive role and significance in stimulating the innovation vitality of state-owned enterprises and stimulating the creativity of core talents.

The total salary can be divided into two ways: for enterprises with a large span of main business, large fluctuations in business objectives, and special stages of enterprise development, and reform pilot enterprises such as "scientific reform", "double hundred" and "creating world-class demonstration enterprises", they can implement overall separate management, and their total wages are not included in the scope of the group's salary base; In terms of the introduction of special high-end talents, some separate listings can be implemented to achieve a partial balance of total wages within the group.