Human Capital Compensation Mechanism

Because of the global economic integration and the growth in knowledge economy, human capital which is the most important element in enterprise structure, has exceeded other capital forms. Human beings can efficiently make surplus value if correct instructions or trainings are provided. This has become more and more significant in the modern world, and especially in China whose market economy is being well developed. Selecting the right employee is vital to the company. Competition between selecting potential employee is becoming more overt, standardized, and socialized. However, there are misorientations of value of human capital in many companies in China. As a result, value of human capital is not coherent with market price, so the real value is restricted. This has become one of the main reasons of job-hoppings. Complementing the yield from human capital and stimulating human resource are the vital two elements of a successful market competition.This article explains the concept and theory in complementing human capital, and analyzes the characters in the concept and theory. Also four complementing formats are provided in this article, they are: human capital cost compensation, price compensation, competition prohibit compensation and mentality compensation. These formats are generated from the connotation in capital compensation and a few phenomena found in China, such as"wastage in human capital","59-year-old"and"vase manager". Human capital cost compensation works in two steps. First, before employee is employed, The firm should compensate the stock of human capital formation. Second, because it will take some time to confirm whether the employee is the efficient human capital, so there should be inequality in human capital cost compensation. On top of this, this article has given another format called progressive cost compensation. Price compensation is a complement for increment in human capital. At present, the most efficient method in price compensation is the"annual salary system"which combines long-term incitement and short-term incitement. The fundamental way to generate long-term incitement is to title certain property. There are manager stock option, manager purchase and employee owning shares. Different from cost compensation, price compensation affects enterprise achievement. Competition prohibit compensation should be built in particular for the wastage of higher management or higher technicians. It is mainly to complete company policy and legal requirements. Mentality compensation is a non-material compensation to human capital. According to the theory of human capital incitement, not only material need is required. A good example can be the incitement in power controlling.Because of the variety in human capital investment, need in the main body of human capital is hierarchical. In this case, no complement for human capital return versus value can be achieved. This article discusses different types in human capital compensations theories and methods; in the hope to evaluate human capital value scientifically, and to correct the non-coherent situation between human capital price and value.At last, this article makes suggestions on how human capital compensation optimization should be achieved. Also, after analyzed the existing policy in human capital compensation, it concluded that the root reason for unreasonable human capital compensation policy is that Human Resource is ignored in producing enterprise value. This is also the reason of the wastage in human capital property and the deficiency in yield allocating system. Only do we change from the root, complete the relevant policy that we can attract, keep, and incite human capital. In this way, enterprise goals can be achieved and company, as well as human capital, can reach a two-to-win.