Research on Incentive Mechanism of Enterprise Personnel's

Self-Determined Salary

Lingyu Ji

College of Economics and Management, Shenyang Ligong University, Shenyang, 110159, China

Keywords: Self-Determined Salary, Compensation Function, SDT, Psychological Coefficient, Implementation Pattern.

Abstract: Salary mechanism is the core issue of enterprise distribution system, and it is also important content of

enterprise economic goal realization and management decision. The salary incentive mechanism of the

traditional enterprise personnel comes completely from the unified work performance evaluation system,

which is a kind of incentive behaviour of the management decision-makers. The research holds that the

incentive mechanism of compensation which is conducive to the economic development and management

optimization of enterprises should be the common incentive behaviour of enterprise decision-makers and

employees. Based on self-determination theory (SDT), this paper proposes an incentive mechanism for self-

determined salary, establishes a mathematical model of this salary mechanism, and points out the

quantitative characteristics of the relationship between self-determined target salary and enterprise plan

target salary. According to the three psychological needs of SDT, this paper describes the autonomy,

competence and relationship of enterprise personnel salary, and on this basis, puts forward the basic

hypothesis of running the autonomous salary incentive mechanism.

1 INTRODUCTION

Salary incentive mechanism is the driving force to

ensure the efficient operation and development of

enterprise economy and management. With the

application of humanized management and self-

organization mode in personnel performance

evaluation, many enterprises choose the salary

incentive mechanism that conforms to their own

characteristics, the purpose of which is to seek to

maximize the work efficiency of enterprise

personnel and promote the economic growth and

sustainable development of enterprises.

In recent years, many scholars have explored how

to establish the salary incentive mechanism of

enterprise personnel by combining qualitative and

quantitative methods from the aspects of economic

analysis, management psychology and modern

enterprise system construction, and obtained

valuable research results in theory and practice (Cao

Lin, 2017; Ge Zhimin, 2016; Goya, 2015).

The main starting point of the research on the

salary incentive mechanism of enterprise personnel

is to improve the defects existing in the salary

distribution, its purpose is to restrain the unfair

phenomenon and the "false report" behaviour, and

form an objective, reasonable and scientific salary

distribution method. For example, the main defects

of salary distribution in the degree of individual

effort are not fine division of responsibilities,

decoupling of responsibility from economic

interests, unreasonable relationship between

contribution and income and so on (Tian Yanjun,

2023).

These defects will lead to the failure to truly

reflect the level of individual effort, and to improve

the level of individual effort cannot really get the

corresponding salary. Enterprise managers cannot

get the actual performance goals of employees, and

thus cannot mobilize the maximum efficiency of

enterprise personnel.

Indeed, people-oriented is the management

thinking of modern enterprises, the key issue is how

to realize people-oriented, how to reflect the salary

incentive mechanism people-oriented, so as to

achieve the optimization of enterprise management,

to achieve the maximum economic benefits, is the

enterprise decision makers face the problem to be

solved. Self-determined salary incentive mechanism

can solve this problem. The basic idea of the

incentive mechanism is to motivate employees to

determine the achievable and acceptable target

salary according to their own working ability and

128

Ji, L.

Research on Incentive Mechanism of Enterprise Personnel’s Self-Determined Salary.

DOI: 10.5220/0012731100003717

Paper published under CC license (CC BY-NC-ND 4.0)

In Proceedings of the 6th International Conference on Finance, Economics, Management and IT Business (FEMIB 2024), pages 128-134

ISBN: 978-989-758-695-8; ISSN: 2184-5891

salary expectation, and take it as the main parameter

of salary. At the same time, the compensation

amount is weighted according to the deviation

between the actual result and the target salary. The

application of this method has a strong incentive

effect, that is, when the two factors of directional

incentive and clear constraint coexist, the enterprise

personnel are guided to choose the target parameter

value with full effort and maximum psychological

expectation. Specifically, it is to encourage

employees to try their best to set a higher goal,

rather than a low goal.

In fact, the self-determined salary incentive

mechanism (SDSIM) comes from the self-

determination theory (SDT), which was proposed by

American scholars Deci and Ryan (1985). SDT

discusses the motivation of individual work from the

perspective of basic needs theory and cognitive

evaluation theory, involving three psychological

needs of individual effort, namely autonomy,

competence and relationship (Ryan & Deci, 2017).

In recent years, SDT has been widely used in the

fields of human behaviour analysis, business

management and social psychology, especially in

business management, and has also introduced three

psychological elements into specific human

behaviour management. However, the existing

researches are only reflected in the level of concept

description and meaning analysis, and there is a lack

of research results using SDT to solve specific

problems. For example, some researchers believe

that SDT should be applied to the design of

enterprise personnel compensation incentive

mechanism. However, how to apply it in actual

research and what effects can be achieved are not

involved in the existing literature. This leads to the

motivation of this study, and to the problem of

enterprise personnel salary incentive, combined with

the three psychological elements of DST for

exploratory research.

The purpose of this paper is to apply SDT to the

incentive compensation mechanism of enterprises,

improve the original incentive compensation model

from the perspective of reflecting the three

psychological needs of enterprise personnel, and

establish a new incentive compensation mechanism,

namely, autonomous incentive countermeasure

model. This strategy model has sufficient

exploratory incentive mechanism, which can not

only solve the defects in salary distribution, but also

find the working potential and independent

motivation of enterprise personnel, which is an

effective way to optimize enterprise management. In

addition, the main research method of this paper is

the combination of mathematical modelling and

information analysis.

The basic composition of the research content of

this paper is as follows: In section 2, based on the

original enterprise personnel salary distribution

model, a self-determined salary incentive strategy

model is established, and its basic significance and

function are analyzed. Section 3 analyzes the

operation of autonomous compensation incentive

mechanism according to SDT. Section 4 gives the

research conclusion and the research approach of

future research.

2 THE COUNTERMEASURE

MODEL OF AUTONOMOUS

COMPENSATION INCENTIVE

In the usual incentive countermeasures, the

following salary calculation methods are adopted

(He Ping, 1989):

kQB =

(1)

Where Q is the employee performance target

(workload) set by the enterprise, k is the salary ratio

coefficient determined to according to the nature of

the post, B is the function of Q, called the salary

function, and it is the salary value (salary number)

obtained by the enterprise personnel. According to

the research, formula (1) as a salary distribution

model is a salary incentive mechanism dominated by

enterprise decision makers, and all employees in the

enterprise should complete the performance

objectives set by their posts according to this salary

distribution model.

The biggest defect of this salary distribution

model is that the performance target set fails to

reflect the actual work ability of employees. Some

employees in the same position may be able to

complete the work without much effort, feel that

they have no use, and are not satisfied with the

salary. Others feel that performance targets are set

too high and they are not satisfied with the salary

they get for their efforts. Although enterprise

decision makers believe that reasonable design of

salary coefficient can play an incentive role.

However, due to the information asymmetry

between enterprises and employees in terms of work

motivation, ability and demand, the performance

goal set by decision makers is not the ideal goal to

maximize the efficiency of employees.

The above analysis shows that the main reason

for the defects of the existing salary incentive

Research on Incentive Mechanism of Enterprise Personnel’s Self-Determined Salary

129

mechanism is that the so-called salary incentive

mechanism only determines the salary distribution

through the completion of the workload, which

comes from the incentive thinking and salary

consciousness of the enterprise management

decision-makers themselves. No matter what kind of

enterprise work nature and personnel status, this

simple salary calculation method can be applied.

Although the existing salary calculation method

reflects the incentive function of more work and

more pay in form, it is not an optimized salary

incentive mechanism that conforms to the

characteristics of enterprises. In fact, from the

perspective of optimal management of enterprise

human resources, the real incentive mechanism

comes from the motivation of enterprise personnel,

which has three basic elements, namely, people's

self-awareness and desire, the role and status of

individual employees, and the degree of adaptation

to the enterprise environment and relationship.

According to the above reasons and background,

one of the effective countermeasures to achieve

salary management optimization in line with the

characteristics of enterprise personnel's own

motivation is to use SDT to build a salary incentive

mechanism in line with enterprise personnel's own

motivation. Based on this basic assumption, a new

compensation incentive model is established as

follows, as shown in formula (2).

()

bQ Q

+−







≥

(2)

In formula (2), B

is the compensation value of

the target set by the enterprise (the performance

target that the enterprise personnel must complete),

and

is the self-determined performance target

by the individual, which is determined according to

the actual situation of the employee.

is the

achievement of performance objectives under the

self-determined incentive mechanism, and b is the

compensation coefficient of the self-determined job

competency level.

QQ<

, indicates that no matter the choice

of independent performance objectives, employees

cannot get salary; If

QQ=

, it means that

regardless of the choice of independent performance

objectives, the corresponding remuneration should

be obtained according to the enterprise salary

distribution mode, that is to say, the enterprise

personnel should be encouraged to exceed the

performance objectives according to the actual

situation; If

, a variety of salary incentives

will appear, as shown in Figure 1.

Figure 1: Status of self-determined salary incentive

distribution function.

In Figure 1, horizontal axis

represents self-

determined performance goals from small to large,

and vertical axis B represents salary distribution

from low to high (values are fictitious for

convenience of argument).

The three solid lines in Figure 1 (C

, C

and

) represent different job competency level

coefficients, namely

123

(, , )==bbbb

(low,

medium and high), thus constituting three kinds of

self-determined salary incentive functions

(),(),()

ppp

QgQhQ

(low, medium and high) for

different competency levels.

As can be seen from Figure 1, different starting

points of self-determined incentive performance and

different coefficients of job competency level will

have corresponding self-determined incentive

functions. In the case of the same coefficient of self-

determined job competency level, the basic model of

salary incentive mechanism is as follows:

Q (min) →

Q →

Q (max).

According to the above analysis, the salary

incentive mechanism reflected in Figure 1 is that, on

the premise of independently determining

performance objectives, the core of salary incentive

lies in individuals' cognition and choice of

competency level, thus constituting three kinds of

salary functions.

FEMIB 2024 - 6th International Conference on Finance, Economics, Management and IT Business

130

These three pay functions have their own base

points and pay coefficients, so they reflect the

relationship between different work performance

and pay, namely

(),(),()

ppP

QgQhQ

, as shown

in formula (3), (4) and (5).

Low

()

+−







bQ Q

BfQ

≥

(3)

Medium

()

+−







bQ Q

BfQ

≥

(4)

High

()

+−







bQ Q

BfQ

≥

(5)

Because of different competency levels, different

correspondence between basic performance

objective (

) and salary is determined. Although

, b

and b

have the same compensation coefficient,

they each represent different corresponding

relationships, so the relationship between

performance objective (

) and compensation (B)

is also different.

For example, also the most basic self-determined

performance objective

Q , for different competency

levels b

, b

, the compensation is different. In

addition, although

QQ , but

() ()>

gQ f Q ,

() ()>

hQ f Q , thus indicating that in the case of

higher competency level, a smaller cost can obtain a

higher salary.

In fact, the essential difference between the self-

determined salary incentive strategy model (formula

(2)) and the general compensation function (formula

(1)) is that they have different salary management

concepts. The former reflects the modern

management thinking of self-organization and self-

adaptation, while the latter is the traditional

institutional management mode.

This new salary incentive countermeasure model,

based on the premise of satisfying the work

cognition, desire and psychological perception of

enterprise personnel, forms a kind of salary

management motivation by maximizing the work

potential of individuals based on the self-

organization and self-adaptive operating mechanism.

This motivation comes from the three core elements

of DST theory, which also confirms the theoretical

value and practical role of DST in the study of

enterprise salary incentive mechanism. Then, how to

apply this new salary countermeasure model in

enterprise salary management, the next section will

give a specific analysis.

3 SELF-DETERMINED SALARY

INCENTIVES AND

MANAGEMENT DECISIONS

3.1 The Realization of Self-Determined

Salary

Through the analysis of the incentive countermeasure

model of self-determined salary, a very important

issue is the relationship between the parameter

selection in the model and the effect of the

countermeasure. The evaluation of the incentive

countermeasure of self-determined salary can be

analysed from two aspects: First, whether the

employees can have an objective and reasonable

positioning of their personal work ability, so as to

determine whether the employees have made the

greatest efforts and obtained the due salary. The

second is the satisfaction of enterprise personnel

with salary, that is to say, whether the salary level of

the enterprise and the self-determined performance

target (effort) can achieve the satisfaction of

employees.

Of course, enterprise management decision-

makers may not fully understand the maximum

working ability of employees, and employees

themselves cannot fully grasp their own ability

limits, which requires both enterprises and

employees to make a choice that maximizes the

benefits of both sides from the comprehensive

perspective of enterprise status and employees' own

characteristics, so that the compensation incentive

mechanism will be transformed from uncertainty to

limited certainty (Zhang Jianwei, 2024). In fact, the

salary mechanism of employees is a game between

enterprises and employees in terms of ability,

emotion and psychology. The determination of such

salary is in line with the economic operation and

development of enterprises, and the critical salary

that management decision-makers can do and

employees can accept.

In other words, the significance of this kind of

critical salary is that when it is lower than this value,

the employee cannot accept it, and when it is higher

than this value, the decision maker cannot.

Therefore, this kind of salary is called self-

determined incentive decision compensation.

Research on Incentive Mechanism of Enterprise Personnel’s Self-Determined Salary

131

The implementation process of incentive decision

making is carried out in two ways. First of all, the

decision maker should make a receipt of

information, which has the following three aspects:

(1) Psychodynamic analysis of employees'

different salaries. The so-called psychological

motivation refers to the change of employees'

psychological ability, which can reflect the

behavioural characteristics of employees' work and

income.

(2) The adaptive process of employees' working

ability. This adaptive process is a prerequisite for

employees to establish autonomy in determining

work goals. This is because employees are not

completely clear about their ability to complete

tasks, but only understand the possibility. In other

words, after the self-adaptation process, employees

have certain self-adjustment ability, and the

possibility of job competence increases, which

gradually changes into positive judgment of their

own ability, and form self-determined work goals

under this condition (Li Yifan, 2024).

(3) Environmental impact degree analysis. The

working system of an enterprise is an open system of

information exchange with the outside world, which

is greatly affected by its environment under certain

conditions. It is necessary to understand the extent to

which employees' working ability is affected by the

interference of the external environment. This kind

of impact analysis can provide incentive

countermeasures for management decision makers at

any time (Maurizio Pugno, 2008).

The above three kinds of information are the basic

basis for autonomous incentive decision and the

premise of establishing compensation function. In

this paper, the employee's independent decision to

choose the work goal is called the salary goal.

However, in the real working environment, the

relationship between the employee's work and salary

is not completely linear. That is to say. In some

cases employees are not interested in getting paid

more for better work done (Thomas W Lin et al,

2005). Relative salary will appear here, that is, in the

salary of different jobs and salaries, the satisfaction

criterion is more suitable, that is, the satisfaction

salary of enterprise employees, which is a salary

distribution that realizes the wishes of employees

and can be recognized. This satisfaction consists of

three aspects: job self-satisfaction, competence

fulfilment satisfaction and relationship adaptation

satisfaction.

Due to these three aspects, different psychological

coefficients of enterprise personnel are formed, that

is, P=(P

, P

), in which P

is the psychological

coefficient of job competence, P

is the

psychological coefficient of salary need, and P

the psychological coefficient of environment and

relationship adaptability. In a non-ideal situation, the

three psychological requirements cannot be met at

the same time, so the psychological trend of

enterprise employees is to have a preference among

the three. If enterprise decision-makers can

understand various preferences and degrees, they

can build incentive mechanisms conducive to

enterprise operation and development.

In addition, on the basis of the above analysis,

enterprises can establish the self-determined salary

function introduced in this paper, or choose different

types of salary function. However, in the process of

selection and analysis of salary function,

psychological coefficient analysis of employees

should be added, and the relationship between P, P

, P

and the salary incentive should be studied. In

other words, when P, P

, P

is in the acceptable

stable range, this kind of self-determined salary

incentive mechanism is feasible.

3.2 Basic Assumptions Based on SDT

According to the psychological needs theory of

SDT, "the generation of internal motivation and the

internalization of external motivation need the

nourishment of external environment" (Rosita

Chang et al, 2008). The compensation mechanism of

enterprise employees must meet the three

psychological needs of employees' autonomy,

competence and relationship. The need for

autonomy here refers to the need for employees to

independently choose the target salary based on their

actual conditions and work plan objectives, without

being influenced by others. For job competency

needs, it means that employees are competent

enough to do the essential work. The relationship

needs refers to the employee's personal emotion,

sense of belonging to the enterprise and the need for

responsibility.

The cognitive evaluation theory of SDT also

provides the thinking framework for this kind of

compensation mechanism, that is, how to improve

the cognition of self-determined compensation

realization from the perspective of compensation

construction environment (Priscila Ferreira, 2017).

This is because social environmental factors have an

impact on the motivation of self-determining salary,

and environmental factors have two conditions:

information attribute and control attribute. This

information attribute refers to the intrinsic sense of

competence in the perceived characteristics of

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salary, which enables employees to satisfy their self-

salary expectations, thus generating the motivation

of employees to independently decide the target

salary. Control attribute can produce a kind of

control effect of salary psychological tendency,

which often reduces the blindness of salary choice

(Rosta Farzan et al, 2008). In addition, when

employees have a sense of belonging to the

enterprise and meet the needs of the relationship

between personal salary and the operation and

development of the enterprise, they will have a

strong motivation to decide their own salary.

According to the research, if the model of self-

determined salary incentive mechanism can meet the

needs of enterprise economic and management

development, a self-determining salary operation

mechanism of enterprise employees can be built,

which satisfies a basic assumption, that is, when the

economic and management environment of the

enterprise meets the three psychological needs of

employees: autonomy, competence and relationship.

In addition, when environmental factors have

identifiable information attributes and control

attributes, employees will participate in the incentive

mechanism of self-determining salary. According to

the SDT, corporate employees produce "positive

outcomes in a job performance, work behavior, work

attitudes, and mental health; On the contrary,

employees will have certain psychological barriers,

and the self-determined salary incentive mechanism

will have a negative effect.

4 CONCLUSION AND FUTURE

RESEARCH

Salary incentive is not only an important part of

enterprise human resource management, but also a

decisive factor to enhance enterprise labour

productivity, promote enterprise economic growth

and management efficiency. Under the traction of

the modern enterprise management concept of

people-oriented enterprise personnel, the single

institutional salary incentive mechanism has not

adapted to the operation and development of

contemporary enterprise economy and management.

A compensation incentive mechanism jointly

decided by management decision-makers and

employees can meet the development needs of

contemporary enterprises.

In order to solve the defects of enterprise

personnel compensation incentive mechanism, this

paper establishes a compensation incentive

countermeasure model based on DST to mobilize

enterprise personnel's own motivation. This

countermeasure model raises a new problem for

enterprise management optimization, that is, self-

determined motivation mechanism.

The main theoretical contribution of this study is

to put forward the concept of self-determined salary

incentive mechanism from the perspective of

management optimization, and its motivation

mechanism is determined by three basic

psychological elements, namely, enterprise

personnel's autonomy and desire (autonomy),

competence and relationship adaptation degree.

This paper only puts forward the countermeasures

of enterprise personnel salary incentive mechanism

from the perspective of theory and salary calculation

model construction, and lacks the practical

application analysis and data verification of the

model, which is the limitation and deficiency of this

study.Therefore, as an exploratory study of

enterprise salary management, the countermeasure

model of self-determined salary incentive

mechanism can provide certain inspiration for

enterprise management researchers, this is the

original intention of the author’s research.

In addition, the main content and approach of

future research is to further refine the core view of

DST into the actual study of enterprise salary

management, and establish the basic principle of

enterprise personnel salary incentive mechanism, as

well as the basic characteristics and operation mode

of self-determined motivation from the perspective

of three psychological elements (three dimensions):

autonomy, competence and relationship. In short, the

enterprise self-determined salary incentive

mechanism is a practical application of SDT, and

also a new attempt of the enterprise compensation

system model, which needs to be confirmed and

improved in the specific practice of enterprise

compensation management.

ACKNOWLEDGEMENTS

I would like to express my deep gratitude to

Professor He Ping for his kind guidance during the

research.

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