Abstract
The reform of pay systems in China has received growing attention from scholars over the past two decades. However, despite the great attention given to the business sector in China, one significant category among the pay studies in the Chinese public sector has been missing. In recent years, the Chinese government has started to implement a new wave of reform in the national payment system: performance related pay in the public service units (PSU,“shiye danwei”), which form a cluster of public service providers operating alongside core government and separate from other state-owned or state sponsored organisations. Compared to the extensive discussion of public sector pay in Western countries, there has to date been no academic research on pay systems in the Chinese PSU sector, leaving a significant gap in our understanding of the key changes in and challenges to its human resource management in different organizations. This paper conducted in-depth case studies on the pay system reforms in six state schools, exploring a range of research objectives which draw on motivational theories such as expectancy theory, goal-setting theory, and agency theory. The results indicate that, although the principle of linking pay to individual performance has been well accepted by employees, the introduction of performance related pay in schools does not appear to have achieved the government’s objective of encouraging higher performance but did have other positive consequences such as retaining teachers in rural areas and possibly balancing the teaching resource in the longer run in addition to some unintended outcomes at the same time.