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Human Resources Management Analysis | Key points of difficulty in total wage control

Foreword

The management of total wages is a basic management mechanism of state-owned enterprises, and the responsibility system of factory directors (managers) has been applied as early as the eighties and nineties of the last century, and this is also an important reform of state-owned enterprises in the process of moving from a planned economy to a market economy in the mainland. However, with the deepening of reform and changes in the macroeconomic environment, the difficulty of enterprises in implementing total wage control is also changing, so under the current policy framework, what are the key points of difficulty in implementing total wage control in state-owned assets and state-owned enterprises?

1. What is gross salary?

To implement total wage control, we need to first understand what gross salary is. At first glance, many people may think that gross salary is easy to understand, but when it comes to what total salary consists of, many people are not able to describe it clearly. When further questioning similar concepts such as labor costs, employee compensation, and total wages and salaries, it is difficult for more people to explain clearly. So, what is gross salary?

In this regard, the Measures for the Management of Total Wages of Central Enterprises issued by the State-owned Assets Supervision and Administration Commission of the State Council and the Provisions on the Composition of Total Wages issued by the National Bureau of Statistics have clearly stipulated that total wages refer to the total amount of labor remuneration paid directly by an enterprise to all employees (who have established labor relations) with the enterprise in a fiscal year.

Of course, concepts alone are not enough, in reality, we need to know exactly what it includes. In this regard, we compare total wages with labor costs, employee compensation, employee labor compensation, total wages and salaries, total salaries, total salaries and other words, so as to more clearly clarify what total wages include.

The comparison results are as follows:

Compare labor costs with gross payroll

●Conclusion: Labor cost > labor remuneration of employees> total wages of on-the-job employees = total wages = total wages and salaries

Human Resources Management Analysis | Key points of difficulty in total wage control

Figure 1 Labor cost vs. total salary

For the definition of labor cost, the official source is the 2004 Ministry of Labor and Social Security's "Implementation Measures for the Industry Labor Cost Information Guidance System", which covers the labor remuneration of employees, social insurance premiums, employee welfare expenses, employee education expenses, labor protection expenses, employee housing expenses and other expenses arising from the use of human resources, which is far greater than the concept of total wages. The labor remuneration of employees in labor costs includes the total wages of on-the-job employees and labor dispatch personnel, and the total wages of on-the-job employees are equivalent to the concept of total wages described by the State-owned Assets Supervision and Administration Commission of the State Council and the National Bureau of Statistics. In addition, the State Administration of Taxation has also put forward the concept of total wages and salaries, which refers to all cash or non-cash labor remuneration paid by an enterprise to its employees in each tax year. This is the concept of income tax law, which is mainly used for enterprises to pay enterprise income tax before paying it. In terms of the content covered, the total salary is the same as the total salary.

Compare employee compensation with gross wages

●Conclusion: Employee remuneration > total salary

Human Resources Management Analysis | Key points of difficulty in total wage control

▲Figure 2 Employee remuneration VS total salary

Employee remuneration is a concept in the Accounting Standards, which refers to various forms of remuneration or compensation given by enterprises for obtaining services provided by employees or terminating labor relations, covering short-term remuneration, post-employment benefits and other modules. The division of the constituent elements is different from the total salary, but from the specific content, the remuneration of employees is obviously greater than the total salary, of which some of the constituent elements of short-term remuneration are related to the constituent elements of the total salary, mainly the employee remuneration, bonuses, allowances and subsidies, short-term paid absence, short-term profit-sharing plan These items can find a certain correspondence in the total salary, and items such as employee education, trade union funds, non-monetary benefits, etc., are included in the scope of total wages in actual operation. It should also be determined in combination with the actual situation of specific management.

Compare gross compensation and gross salary

● Conclusion: Total salary ≠ total salary

Different from other concepts with standard definitions, total remuneration only has a general definition, which refers to the total amount of labor remuneration directly paid by an enterprise or enterprise group to employees (including subsidiaries) within a certain period of time, including employee wages, bonuses, overtime pay, job allowances, retirement pensions, welfare and safety expenses, labor insurance premiums, training expenses and other expenses. In the specific practice of enterprises, the constituent elements of total salary are generally defined by the enterprise, which is mainly used to measure the matching of the total salary (level) of the enterprise with its own economic affordability and talent strategy. Therefore, the total salary is not the same as the total salary, and the concept of total salary is rarely used in the context of the total salary management of state-owned enterprises (it is not excluded that some places or enterprises still use it). If used, it will generally be close to the definition of total salary, or further clarify the scope of total salary.

Second, the key points of the difficulty in the control of total wages

The policy system for total wage control

● The policy system of "national-local-enterprise + industry" frames the total salary within the boundary

In the state-owned assets and state-owned enterprises (SOEs) system in mainland China, the total wage control presents the characteristics of "all levels managing all levels", that is, the state-owned assets regulatory agencies at all levels issue documents to manage the total wages of their affiliated enterprises. The total wage control system at the higher level (such as the central government) is only applicable to enterprises directly supervised, and has no direct binding force on the lower-level state-owned assets supervision units and the enterprises under their supervision; Of course, the lower-level state-owned assets supervision units often refer to the system documents or relevant requirements of the superior when formulating the total wage management system at the same level. At the same time, some industries (such as the financial industry) also have corresponding policies to regulate the total wages of enterprises in their own industries.

Human Resources Management Analysis | Key points of difficulty in total wage control

▲Figure 3 The total wage management policy system of state-owned enterprises

The concerns of managers and managers of total payroll

●"One level manages one level", but the concerns of managers and the managed have their own emphasis

State-owned assets regulators and state-owned enterprises at all levels are concerned about how to implement total work control, but their respective concerns are different. The state-owned assets regulatory agency is a first-level manager, mainly concerned with how to formulate appropriate policies and systems, and has greater decision-making and policy interpretation power. The first-level enterprise is the middle manager, which is not only managed by the superior state-owned assets regulatory agency, but also refers to the relevant system of the total salary of the superior regulatory agency to manage the total salary of the subordinate enterprise - in the space given by the superior regulatory agency to adjust the salary distribution of the affiliated enterprise, there is a certain decision-making power and interpretation power, but the space is relatively limited. Enterprises at level 2 and below are the managed, and the main focus is on how to distribute wages internally under the requirements of the parent company's total payroll management.

Human Resources Management Analysis | Key points of difficulty in total wage control

Figure 4 Managers and the managed of total wages in state-owned enterprises

The key link of total salary control

●Pay attention to the three key links of total amount generation, total allocation and total management

According to the policy requirements of total wage management and the regulatory characteristics of state-owned assets, state-owned enterprises need to grasp the three key links of total amount generation, total distribution and total management when carrying out the salary system under the total wage management requirements. If any of these three links are out of control, it may lead to the problem of overall control out of control.

Human Resources Management Analysis | Key points of difficulty in total wage control

▲Figure 5 There are three key aspects of total wage control in state-owned enterprises

(1) Total amount generation

The work of the total amount generation link is to classify and determine the linkage mechanism of wages and benefits according to the functional nature of the enterprise, the characteristics of the industry and the development stage. The basic formula is as follows:

Human Resources Management Analysis | Key points of difficulty in total wage control

Figure 6 Gross salary budget formula

Among them, the total salary base is generally determined according to the number of liquidation evaluations in the previous budget year approved or filed (this is also the "only increase, not decrease" in the total salary control); Under special circumstances, such as mergers and acquisitions, new institutions, new projects, etc., which lead to inconsistencies in the budget caliber between years, or newly established enterprises, it is necessary to adjust the total wage base. The increase in economic benefits is the key to the control of the total amount generation link, and the key point is to determine the linkage index and index weight. Because the enterprises supervised by the state-owned assets regulatory agencies at all levels often cover different industries and are at different stages of development, they generally do not use a set of indicators to carry out unified control throughout the end, and the usual practice is to supervise the enterprises in combination with their own types, and determine the linkage indicators and index weights to the superior institutions within the scope of the policy provisions, therefore, the supervised enterprises need to make the index selection as reasonable as possible, such as the index selection on the basis of the same industry, the same scale and the same type of enterprises. Make a choice based on an analysis of the company's past performance, and so on.

【Case】Linkage index of total wages of state-owned enterprises in a first-tier city

At the institutional level, according to the functional positioning, industry characteristics and development stage of enterprises, the linkage indicators of total wages of different types of enterprises are stipulated. Among them, the economic benefit linkage index of competitive enterprises is the total profit (or net profit), economic added value, return on net assets and other indicators that reflect economic benefits, state-owned assets preservation and appreciation and market competitiveness, and other linkage indicators are labor productivity, labor cost profit rate; The linkage indicators of economic benefits of financial enterprises are the indicators reflecting economic benefits, asset quality and solvency, such as total profit (or net profit) and return on net assets, while other linkage indicators are labor cost profit margin and risk control indicators; The linkage indicators of economic benefits of functional and quasi-public welfare enterprises are operating income, total profit (or net profit), and task completion rate, and other linkage indicators are cost control rate and personnel expense rate.

At the practical level, it is required that each enterprise has no more than 4 linkage indicators, and the indicators should be consistent in the budget and liquidation, and should not be changed arbitrarily in the budget year and cycle.

(2) Total allocation

The distribution of total wages includes two levels, namely distribution to subordinate enterprises and distribution to employees. Among them, the distribution to subordinate enterprises generally refers to the total wage management method of the superior management agency, and the total wage management system of the enterprise to which the enterprise belongs should be established and improved; The distribution to employees is generally to establish and improve the employee salary market benchmarking system, build a salary management system based on job value and performance contribution, strengthen the performance appraisal of all employees, improve the salary market competitiveness of key positions, and adjust the unreasonable income distribution gap.

(3) Total amount management

Total payroll management includes three parts: budget management, process management, and liquidation management. Among them, the total salary budget management is based on the total salary liquidation amount of the previous year, and the wage determination mechanism is determined by classification and classification. The key is to strike a balanced budget. As shown in Figure 7, on the left, the total salary budget is calculated according to the formula of "total amount generation" based on the total salary policy of the superior organization, and on the right, the total salary budget is summarized from the bottom up according to the internal salary system, and finally the balance between the left and right sides is finally achieved. It is important to note that the total salary budget on the left is the upper limit of the total salary budget on the right, and if the right side exceeds the left side, it should be adjusted.

Human Resources Management Analysis | Key points of difficulty in total wage control

Figure 7 Budget management of total salary

Gross payroll process management is the dynamic monitoring of the execution of the gross payroll budget. The core goal of management is to keep the number of budget executions consistent with the number of issues that can be issued in the final liquidation, so as to prevent the occurrence of over-issuance. Of course, in the event of a major change in the basis of budget preparation (such as a major adjustment of macroeconomic policies, a major change in the market environment, a merger and reorganization of enterprises, etc.), enterprises still have the opportunity to apply for adjustments.

The management of total salary liquidation is the implementation of hierarchical liquidation, that is, the total salary of the consolidated enterprise and the total salary of the enterprise headquarters are liquidated and supervised by the state-owned assets regulatory agency; The total salary of the enterprise to which the enterprise is liquidated. The core goal of this link management is to standardize the payment of wages and ensure that the growth of wages and benefits is synchronized. When there is a deviation between the number of budget execution and the number of liquidation can be issued, it is necessary to deal with it: if the number of budget execution is less than the number of liquidation can be issued, there are two common ways to deal with it, one is to pay it in the year determined by the financial audit and include it in the total salary of the current year, and the other is to use it as a balance and use it on a rolling basis within 3 years after being approved by the superior authority. If the number of budget execution is greater than the number that can be issued for liquidation, it needs to be recovered and related accounting treatment is carried out, and the enterprise will be punished accordingly.

III. Conclusion

Although total wages have been used in the management of state-owned enterprises for more than 30 years, they still need to be cautious in actual management because they involve the vital interests of all personnel and are closely related to the supervision of state-owned assets and the development of state-owned enterprises. However, CUHK Consulting also believes that under the increasingly clear policy framework, state-owned enterprises that "dance in shackles" are also more likely to choose their own actions because there is no ambiguity, and implement innovation in total wage management and salary incentives within the boundary, so that employees can give full play to their own value and receive corresponding remuneration more freely.

Author: CUHK Consulting

Source: CUHK Consulting

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