Empirical Study Of Supplementary Pension System Optimization On Long-term Employee Incentive

In order to perfect the retirement pension system, improve the overall pension security level and speed up the construction of a multi-level endowment insurance system, Notice of the Ministry of Finance, the Ministry of Human Resources and Social Security and the State Administration of Taxation on Issues concerning Individual Income Tax on supplementary pension or Occupational pension (No.103 [2013] of the Ministry of Finance) was issued on December 6, 2013. Issuing of the document means China’s supplementary pension system changes from quasi ETT tax system to EET tax system which has been applied in most OECD countries and recognized in international community. Moreover, the issued supplementary pension individual tax defer policy and the Notice on Expanding the Investment Scope of supplementary pension issued in April of 2013 can be viewed to have constituted a "China’s 401(k) plan", which signifies improvement of supplementary pension individual income tax policy system upon referring to universal practice of developed countries and reality as well as a milestone in the history of China’s supplementary pension system.The favorable policies constitute a particularly important driving force for the development of China’s supplementary pension. It is believed that supplementary pension will be accepted and recognized by more and more enterprises with the incorporation of pensions. But how to increase retirement income for individual employee under the precondition of not increasing burden of the enterprise? How to encourage employee performance to achieve win-win for both enterprises and employees through supplementary pension? These are issues this paper concerns about. This paper is special in that: it has made an empirical research of case companies, made an analysis of shortcomings of current supplementary pension system and redesigned an incentive supplementary pension plan upon the issuing of China’s 401 (k) plan. Ultimately, this paper is aiming at giving some enlightenment for enterprises of the same industry or similar enterprises and driving the development of incentive supplementary pension plan.This paper involves knowledge of demography, human resource management, statistics and other disciplines. From perspective of madhyamaka, this paper regards classic theories (include permanent income hypothesis and deferred wage theory) of supplementary pension and Poter & Lawler’s Expectancy Model and two-factor theory from among motivation theories as theoretical foundation of this research. Furthermore, the author has sorted out foreign studies of supplementary pension from three aspects:development tendency of supplementary pension, legal framework of supplementary pension, investment and taxation of supplementary pension as well as domestic studies of reasons for the slow development of supplementary pension system in China, studies of feasibility of China’s 401(k) plan and incentive functions of supplementary pension to employees and discussions on the design of supplementary pension plans. Through reviewing relevant theories and literatures, the author has concluded the main idea of this paper, that is, establish China’s 401(k) system according to national conditions of China, regard supplementary pension system as a long-term incentive instrument and achieve the purpose of encouraging employee performance and common progress of enterprises and employees through differential design of supplementary pension plan.This paper is innovative in following aspects: the author has established a China’s 401(k) plan system according to issued policies related to supplementary pension after making a full analysis of features of the plan; has studied the construction of a long-term incentive mechanism of supplementary pension by combining with empirical research under the background; has made empirical research of the questionnaire survey of satisfaction with supplementary pension of employees of the case companies and a regression study of the result with binary logit model in the fourth chapter as a basis for further designing supplementary pension plan; has redesigned the paying, investing and drawing procedures of supplementary pension plan by drawing upon experience gained on key points and presenting features of incentive supplementary pension plans.